termination Archives

In a recent Ontario decision, the court found that a termination provision in an employment contract was unenforceable for its potential violation of employment standards legislation.

What Happened?

The employee was a construction employee working in the construction industry. He was first employed by the employer in 2012, and was laid off from time to time.

On November 10, 2015, he signed an employment agreement with the employer.

The employee was later placed on temporary layoff on October 10, 2017. The employee was not recalled to work and, in December 2017, he found alternate employment. No notice of this lay-off was given, nor did he receive any pay in lieu of notice from the employer.

In June 2018, the employee commenced an action in the Small Claims Court seeking damages for wrongful dismissal.

The employer claimed that the employment contract absolved it from any requirement to give any notice of the lay-off, or pay in lieu of notice. It also relied on the fact that as a construction employee, the employer had no obligation under the Employment Standards Act (“ESA”) to give notice or termination pay in lieu thereof.

The Employment Contract

The relevant provision at issue under the employment contract stated:

Termination of Employment
…..
The Employee may be terminated at any time without cause upon being given the minimum periods of notice as set out in the Employment Standards Act, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation. The Employee acknowledges that pursuant to the Employment Standards Act they are not entitled to any notice or time in lieu thereof due to the nature of their job and as such they are entitle[d] to absolutely no notice or pay and benefits in lieu thereof upon termination.
The termination provisions set for[th] above, represent all severance pay entitlement, notice of termination or termination in lieu thereof, salary, bonuses, vacation pay and other remuneration and benefits payable or otherwise provided to the Employee in relation to the termination of the Employee regardless of cause or circumstances.

Lower Court Decision

The Deputy Judge granted judgment in favour of the employee, awarding him damages equivalent to 9.5 weeks’ salary, which was equal to $9,530.

The Deputy Judge agreed with the employee’s submissions that the termination clause of the employment contract was void because it purported to contract out of the obligation under s. 60(1)(c) of the ESA to pay benefits during the statutory notice period and the presumption of reasonable notice was not rebutted by the employment contract.

The employer appealed.

Issues on Appeal

The employer claimed that the Deputy Judge erred by determining that it had purported to contract out of the obligations under s. 60(1) the ESA to pay benefits during the statutory notice period despite the fact that the employee was a statutory “construction employee” and not entitled to statutory notice under the ESA.

Appeal Decision

The court began by explaining that the common law principle of termination of employment on reasonable notice is a presumption, rebuttable only if a contract of employment clearly specifies some other period of notice. Additionally, a contract of employment is only enforceable if it complies with the minimum employment standards in the ESA. As a result, if it does not do so, then the presumption is not rebutted, and the employee is entitled to reasonable notice of termination.

However, the court also noted that some types of employees are not protected by the ESA, including those “prescribed individuals” under s. 3(5)12 of the ESA. Nonetheless, if an employee has two or more roles in their employment, and only one of these roles is not protected by the ESA, they will continue to be protected with respect to that other role as per s. 3(6) ESA. The court acknowledged that the employee fell within the definition of a prescribed individual as a construction employee under s. 2(1)9 of the ESA’s Regulation 288/01.However, the court then explained that the Regulation does not disentitle prescribed individuals to the protection of the entire ESA; rather, the inapplicability of the ESA to the employee is limited to those employment standards set out in s. 55 – being notice of termination and termination pay.

The court found that the error in the employment contract was twofold.

First, an employee cannot contract out of a protected employment standard under the ESA, even if that particular standard does not yet apply under s. 5(1). The court stated:

“It is sufficient if a provision of an employment contract potentially violates the ESA at any date after hiring […]. Accordingly, on the chance that [the employee]’s position at [the employer] changed to something other than a construction employee, the effect of the Employment Contract is that it denies [the employee] his right to benefits during his notice period, which is protected by the ESA. While the Employment Contract does refer to [the employee] being employed as an apprentice and that he will be working in the construction industry, it does not explicitly state that this applies only to him while occupied as a construction employee and that it would be of no force or effect if his position changed.”

Secondly, the court found that the termination provision of the employment contract also violated the ESA in a way that was not so remote, because as “prescribed” employees, construction employees may not be entitled to the employment standards governing the termination of employment or notice thereof, but they are still entitled to the employment standards guaranteed in the event of their severance. The court opined that if the employer grew in size, employing more than 50 employees and then discontinued its business, or else had a payroll more than $2.5 million, the employee would have been entitled to severance pay, irrespective of his job description. The court stated:

“The Employment Contract clearly disentitles [the employee] to these employment standards. Again, the potential violation of the ESA renders these provisions unenforceable.
Accordingly, […] even a potential violation of the ESA, no matter how remote, should be unenforceable.”

As a result, the court found that the termination provisions, read as a whole, clearly showed that the employment contract purported to contract out of the ESA in at least two ways and dismissed the appeal.

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At Bader Law, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Bader Law. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at (289) 652-9092 to learn how we can help.

In a recent Ontario case, a Canadian employer attempted to stay an employee’s action on the basis of arbitration agreements the employee had signed with its U.S. counterpart.

What Happened?

The employeeis a U.S. citizen who began to work with the employer (the “U.S. employer”) in 2012. The U.S. employer is a company incorporated in the U.S. and operating in California.

The employee entered into four employment agreements with the U.S. employer in the thirteen-month period from then until December 2013 and continued to work with the U.S. employer in California until December 2016.

Each of the employment contracts that the employee entered into contained a term requiring that all disputes arising from his employment be determined by arbitration conducted in California. The employee also executed two separate arbitration agreements to this effect during his employment with the U.S. employer.

In December 2016, the U.S. employer offered the employee the opportunity to move to Ontario, Canada, to work with one of its related entities (the “Canadian employer”), which the employee accepted. On January 2, 2017, the employer began working with the Canadian employer in Ontario.

However, the employee did not, at any time, execute any written employment contract with the Canadian employer. Additionally, the employee did not enter into any written agreement with the Canadian employer requiring that any dispute arising from his employment in Canada would be determined by arbitration.

The employee was terminated from his employment with the Canadian employer on February 6, 2018, effective March 30, 2018. He brought an action against the Canadian employer seeking damages for his dismissal.

The employee also sued the U.S. employer for the U.S. employer’s role in causing or contributing to the damages that he alleged to have sustained by the termination of his employment in Ontario with the Canadian employer. He claimed that the U.S. employer made misrepresentations to him that caused him to re-locate to Canada, and that he relied on these misrepresentations to his detriment. He also sued two directors of the Canadian employer.

In response, both the U.S. employer and the Canadian employer brought a motion to stay or to dismiss the action as against them on the basis of the arbitration provision contained in the agreements that were executed by the employee with the U.S. employer during the period of his employment in California. The employers relied on section 7(1) of the Arbitration Act, 1991, which states:

If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

In response to both employers’ motion, the employee submitted that his action should not be stayed as against both or either of the employers because he did not enter into an arbitration agreement with the Canadian employer, and because his agreement to arbitrate with the U.S. employer was in relation to his employment in California. Further, he submitted that even if the employers could establish an applicable arbitration agreement, it should not to be enforced on the basis that it was invalid because it was an attempt by the employers to contract out of the provisions of the Employment Standards Act, 2000.

Issue

The sole issue was whether the employee’s action should to be stayed as against both employers, or either of them, on the basis of an arbitration agreement.

The Decision

Citing previous case law, the court began by setting out a five-part analytical framework for conducting its analysis on whether to stay proceedings due to an arbitration agreement:

(a) Is there an arbitration agreement?

(b) What is the subject matter of the dispute?

(d) Does the dispute arguably fall within the scope of the arbitration agreement?

(e) Are there grounds on which the court should refuse to stay the action?

After analyzing each element of the five-part test, the court concluded that neither employer had established an entitlement to a stay on the basis of a valid, applicable arbitration agreement.

The court stated that, while case law is clear that a court must, on motion, stay the court proceeding in favour of arbitration where there is a valid arbitration agreement, there must be proof of a valid and binding arbitration agreement.

In this case, the court determined that not one of the arbitration agreements submitted by the employers were executed with the Canadian employer, and that the applicable arbitration agreement executed between the U.S. employer and the employee did not pertain to the claim brought in Ontario for the termination of the employee’s employment with the Canadian employer in Ontario.

As a result, the court dismissed the employers’ motion to stay the employee’s actions against them.

Get Advice

At Campbell Bader LLP, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at 905-828-2247 to learn how we can help.