In Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, Justice Pierce reviewed the following without cause termination clause:
“The Township may at its sole discretion and without cause, terminate this Agreement and the Employee’s employment thereunder at any time upon giving to the Employee written notice as follows:
(i) the Township will continue to pay the Employee’s base salary for a period of two (2) weeks per full year of service to a maximum payment of four (4) months or the period required by the Employment Standards Act, 2000 whichever is greater. This payment in lieu of notice will be made from the date of termination, payable in bi-weekly installments on the normal payroll day or on a lump sum basis at the discretion of the Township, subject at all times to the provisions of the Employment Standards Act, 2000.
The judge found that this clause was illegal as it contravened the ESA in the following ways:
- Base Salary is different from Regular Wages as required by the ESA which can include commissions, bonuses and the like.
- Section 61(1) of the ESA requires that pay in lieu of notice be paid as a lump sum and not on an installment basis.
- By giving the Employer the sole discretion to terminate at any time , this breaches both section 53 (reinstatement after a protected leave ) as well as Section 74 (reprisal for exercising a right under the ESA).
My Comments:
This case now adds to the long list in the way which poorly drafted termination clauses can violate the ESA and render the entire termination provision unenforceable. Normally, this leads to a determination of reasonable notice; however, in this case because the Plaintiff was terminated partly into a fixed term contract (another huge mistake in drafting) she received compensation for the balance of the contract, which was 101 weeks or $157,071.
This case is under appeal.
Barry B. Fisher, LL.B., is a mediator and arbitrator of both employment and labour relations matters. He offers three forms of ADR based on clients’ needs: Mediation, Arbitration and Med/Arb. Barry is from the evaluative school of mediation and brings his over 30 years’ experience as an employment lawyer and legal author to the dispute. In addition to his knowledge of the legal issues involved in these disputes, he also has a deep understanding of the psychological factors that motivate both employees and employers. By combining these two skills, Barry is able to achieve a settlement rate of over 80% of the disputes that he mediates.