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Future Proofing Employment Contracts: Ensuring the Validity of Termination Clauses
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Future Proofing Employment Contracts: Ensuring the Validity of Termination Clauses

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Employers must exercise caution when drafting the terms of employment contracts. An improperly drafted provision in an employment contract can have unintended consequences, even if an employer’s application of that provision is valid in the given situation. Contract provisions must fall within the minimum standards set out in provincial legislation, and they must do so under all circumstances throughout their duration. The Ontario Employment Standards Act (“ESA”) provides the minimum standards for most employers and employees in Ontario. The ESA establishes rights and responsibilities for employers and employees, including the minimum standards surrounding reasonable notice of termination or payments in…

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Employers Beware: If You Allege Just Cause for Terminating an Employee, You Had Better Be Able to Prove It

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In Ruston v Keddco Mfg. (2011) Ltd., the Ontario Court of Appeal considered the consequences of failing to prove an allegation of just cause for terminating an employee. In upholding the trial judge’s decision, the Court affirmed that employers may have to pay a terminated employee additional damages if they falsely or incorrectly allege cause for dismissal. The employee was 54 years old at dismissal and occupied the highest position as President of the company. He received quick promotions from his initial position as a sales representative in 2004. The employee had a grade 12 education and had been unsuccessful…

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Courts Will Not Make Your Illegal Termination Clause Valid for You

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In order for a termination clause in an employment contract to be considered valid, it must adhere to the minimum standards under the Ontario Employment Standards Act (“ESA”). Many employers include termination clauses to reflect their intention to limit entitlements owed to a dismissed employee to those required by the ESA. In order for courts to consider the termination provisions in an employment contract valid, the clause must be drafted in a manner that clearly reflects the parties’ intentions to abide by the ESA’s statutory minimums. This includes addressing issues such as continued payment of employee benefits, severance, and providing…

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Can an Employer Act in Bad Faith by Concluding That an Employee Has Resigned?

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An employer’s duty of good faith in the manner of dismissing an employee is a well-established principle of Canadian employment law. When initially established in Wallace v. United Grain Growers Ltd., breach of the duty – that is, bad faith conduct by an employer – became another factor that Courts would consider when determining the reasonable notice period for a terminated employee. Bad faith damages were typically referred to as Wallace damages and allowed Courts to extend the reasonable notice period where bad faith conduct by an employer was found. In Honda Canada Inc. v. Keays, the Supreme Court of…

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What Is the Maximum Notice Period an Employee is Entitled to?

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Absent exceptional circumstances, the maximum notice period is 24 months. It is widely recognized that a 24-month notice period represents the upper limit of an award for reasonable notice for long-term employees. While there is no absolute upper limit, the employee will need to present exceptional circumstances to support a notice period exceeding 24 months. In Dawe v. Equitable Life Insurance Company of Canada, the Ontario Court of Appeal considered an employee’s entitlement to notice and whether the trial Judge’s award of a 30-month notice period was appropriate in the circumstances. At the time of termination, the employee was 62-years-old…

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Is Your Employer Taking Your Complaints Seriously?

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In Bassanese v. German Canadian News Company Limited et al., the Superior Court of Justice considered an employee’s complaints of harassment in the workplace and the requirement that employers take steps to investigate such complaints. The Court not only awarded compensation in lieu of notice for wrongful termination, but awarded the employee damages for assault and battery as well as aggravated damages. In total, the employee was awarded compensation totalling $194,433.17 and $10,000.00 in costs. This case provides an example of the consequences that employers face if they fail to take workplace harassment complaints seriously. It also serves as a…

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Does your Employer Owe you a Duty of Good Faith?

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In short: yes. In 2014, in a landmark decision called Bhasin v. Hrynew, the Supreme Court of Canada recognized that acting in good faith is an “organizing principle” underlying all contract law. Acting in good faith may take various forms depending on the context, and will be fact specific. In the employment context, the Supreme Court of Canada stated that “acting in good faith in relation to contractual dealings means being honest, reasonable, candid and forthright.” Below details Jonasson v. Nexen, a 2018 case where the employer did the exact opposite and was required to pay damages for breaching its…

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Do You Owe Your Former Employer a Fiduciary Duty?

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A fiduciary employee is an employee who has strong loyalties to their employer during and after their employment relationship and who may hold a high position of trust and responsibility in the company. An employee’s fiduciary duty may not flow directly from an employment contract. It can exist from the nature or the essence of the employee’s relationship with his or her employer. It is already established that a fiduciary’s duty to his or her employer does not cease following the end of the employment relationship. Soliciting business from former clients may be considered a breach of that duty depending…

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Do You Have an Obligation to Return to Work if You Have Been Constructively Dismissed?

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The answer: it depends. Upon dismissal, employees have an ongoing obligation to mitigate their damages. In certain circumstances, such a duty requires employees to return to work. In Gent v. Strone Inc., the Superior Court of Justice determined that the employee failed to appropriately mitigate his damages as he had an obligation to return to work under the circumstances. The employee was a fifty-three-year-old Health and Safety Training Specialist who had worked for the company for more than 22 years. He was temporarily laid off due to lower work volume. The employee was told he’d be recalled as soon as…

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Can an Employee’s Permanent Disability Lead to a Lawful Termination?

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In Katz et al. v. Clarke, the Ontario Divisional Court considered the issue of whether an employee’s desire to work prevents the employer from terminating them. Employers find themselves in a dilemma when their employee expresses a desire to return to work from disability leave while their doctor recommends otherwise. The Ontario Court of Appeal upheld the decision and confirmed a rule that assists employers in determining whether they can terminate a disabled employee. In Katz et al. v. Clarke, the employee had been on disability leave since 2008. The employee went on short-term leave which transformed into long-term leave….

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