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No Benefit Continuation? No Contract!

We all minimize risk.  To avoid injury we wear helmets when we ride our bicycles; we are not permitted to speak on our cell phones when we drive; and as employers we limit our financial exposure by negotiating employment agreements. 

The Employment Standards Act, 2000 of Ontario regulates employment in Canada addressing things like minimum wage and entitlement to unpaid wages.  It also directs employers what to do on termination of employment. 

The Employment Standards Act, 2000 details an employees’ minimum entitlements only.  In addition to legislated requirements employers must provide dismissed employees with common law notice.  The amount of notice required is decided on an individual basis. 

While the Employment Standards Act recognizes the employer’s right to terminate employment without cause and sets out a formula for notice and severance pay it does not take into account the particular circumstances of the dismissed employee.  Common law reasonable notice is an attempt to estimate, in advance, approximately how long it might take a particular employee to find comparable employment. According to our Courts, it is irrelevant that the employee’s position and duties may still exist; the employee does not have to have done something “wrong” to justify termination.  An employer can terminate so long as it complies with the Employment Standards Act, 2000 and the common law.  

The main factors relevant to the determination of a common law reasonable notice are the employee’s age, length of service, salary, and the level of position. It will obviously take longer for a fifty-nine year old woman who has been at the same company for thirty years to find a new position than it will for her twenty-five year old colleague earning a lower salary.

In order to avoid significant “payouts” employers minimize their financial responsibility through employment contracts which detail entitlements on termination of employment.  In Stevens v. Sifton Properties Ltd. the enforceability of a termination clause was scrutinized.

Ms. Stevens was a golf professional with Sifton Properties who was terminated without cause.  On dismissal the employer paid her three weeks notice relying on its employment contract which indicated,

13. (b) The Corporation may terminate your employment without cause at any time by providing you with notice or payment in lieu of notice, and/or severance pay, in accordance with the Employment Standards Act of Ontario.

(c) You agree to accept the notice or payment in lieu of notice and/or severance pay referenced in paragraph 13(b) herein, in satisfaction of all claims and demands against the Corporation which may arise out of statute or common law with respect to the termination of your employment with the Corporation.

Ms. Stevens argued the clause was not enforceable because it failed to provide for the continuation of her benefits during the Statutory Notice Period. The Court agreed with Ms. Stevens noting that the wording of the clause specifically precluded benefit continuation during the notice period which was required by the Employment Standards Act, 2000. 

In an attempt to limit big payouts on termination of an employee its better to provide alittle bit more then what the statutory minimums require.  While employers can limit entitlements on termination to only the Employment Standards Act, 2000 they must comply with the minimum requirements or risk payment of common law notice.  Where the contract is rigid and payouts small human nature is such that we are more inclined to want to set it aside in favour of common law reasonable notice.