{"id":231,"date":"2019-12-12T13:59:55","date_gmt":"2019-12-12T18:59:55","guid":{"rendered":"https:\/\/www.debousquet.com\/blog\/?p=231"},"modified":"2022-03-04T14:22:25","modified_gmt":"2022-03-04T19:22:25","slug":"is-it-possible-to-predict-how-courts-will-treat-your-termination-clause-the-early-aftermath-of-nemeth-v-hatch","status":"publish","type":"post","link":"https:\/\/www.debousquet.com\/blog\/2019\/12\/12\/is-it-possible-to-predict-how-courts-will-treat-your-termination-clause-the-early-aftermath-of-nemeth-v-hatch\/","title":{"rendered":"Is It Possible to Predict How Courts Will Treat Your Termination Clause? The Early Aftermath of Nemeth v Hatch"},"content":{"rendered":"

In <\/span>Nemeth v Hatch Ltd, <\/span><\/i><\/a>2018 ONCA 7, the Ontario Court of Appeal added a lot of uncertainty to the already confusing task of interpreting termination clauses in employment agreements<\/a>. Employees have both common law and statutory entitlements to notice of termination without cause. Many employers try to limit their employees\u2019 entitlements to the minimum amounts of notice required by the <\/span>Employment Standards Act <\/span><\/i>(<\/span>ESA<\/span><\/i>)<\/span>, <\/span><\/i>or to another amount that is less than the reasonable amount of notice at common law. To do so successfully, the employer must clearly specify some other period of notice that meets the minimum entitlements prescribed under the <\/span>ESA.<\/span><\/i><\/p>\n

Before <\/span>Nemeth, <\/span><\/i>courts generally required very clear and specific language to rebut common law entitlements. However, in <\/span>Nemeth, <\/span><\/i>the Court of Appeal held that \u201cthe need for clarity does not mean that the parties must use a specific phrase or particular formula, or state literally that \u2018the parties have agreed to limit an employee\u2019s common law rights on termination.\u2019 It suffices that the parties\u2019 intention to displace an employee\u2019s common law notice rights can be readily gleaned from the language agreed to by the parties.\u201d Based on these principles, it held that the following clause was enforceable and successfully rebutted common law entitlements:\u00a0<\/span><\/p>\n

The Company\u2019s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.<\/span><\/p>\n

Although this makes it easier for employers to limit employees\u2019 entitlements, it also makes it much more difficult to determine which clauses successfully rebut common law notice. Predicting any individual judges\u2019 decision on the matter is arguably more challenging than ever, as evidenced by the cases that have been decided since <\/span>Nemeth.<\/span><\/i><\/p>\n

Of eight cases that cite <\/span>Nemeth, <\/span><\/i>four involved termination clauses that were found to be enforceable and to rebut common law entitlements, three involved clauses that were void for violating the <\/span>ESA, <\/span><\/i>and one involved a clause that was enforceable but failed to rebut common law entitlements. Further evidencing the confusion, one of the cases in which the termination clause successfully rebutted common law entitlements was decided on an appeal that reversed the trial judge\u2019s finding that the clause was void.<\/span><\/p>\n

The confusion that the decision has created is especially clear when considering two termination clauses that were treated differently from both each other and the clause in <\/span>Nemeth<\/span><\/i>:<\/span><\/p>\n