Courts have devised many methods for invalidating termination provisions that incorporate the minimum requirements of employment standards legislation.
That’s because judges recognize the inherent unfairness of such provisions. An employee with more than eight years of service working for an Ontario-regulated employer with an annual payroll of less than $2.5 million gets a maximum of eight weeks’ notice or pay in lieu regardless of the actual years of service. It’s easy to see the unfairness of that, particularly with older employees or those with significant years of service.
Employees working for Ontario-regulated employers with an annual payroll of $2.5 million or more get a maximum of 34 weeks, something that can result in unreasonable termination packages.
Courts do their utmost to nullify employment standards termination provisions. Clearly, they’ll nullify any provision that would result in an employee receiving less than the minimum.
Courts have engaged in mental gymnastics by nullifying termination provisions that don’t result in an employee receiving less than the employment standards minimum if they’d result in a violation of the standards had the employee been on the job for a longer period of time.
Courts have recently nullified employment standards provisions that otherwise appear to satisfy employment standards requirements but don’t refer to the continuation of benefits mandated by the legislation. In one case, the court nullified a provision as it didn’t refer to benefits. It stated that the corporation might terminate the employment without cause at any time by providing notice or payment in lieu and/or severance pay in accordance with the Employment Standards Act.
It upheld another clause stating the employer might terminate the employment without cause for any reason upon the provision of reasonable notice equal to the requirements of the applicable employment or labour standards legislation. It said that by signing, the employee agreed that upon receipt of the entitlements in accordance with the legislation, no further amount would be due and payable whether under statute or common law.
Courts have also nullified employment standards provisions that are ambiguous by, for example, referring to notice instead of notice and severance pay for employers with a payroll of $2.5 million or more.
It’s time to do away with these mental gymnastics. In most cases, there’s an inequality of knowledge and bargaining power between employers and employees.
Employers understand the meaning of these termination provisions. They employ these provisions with the express intention of frustrating the common law rights of employees. There’s nothing wrong with that as long as prospective employees fully understand the substance of what they’re agreeing to.
However, most prospective employees know little about common law rights. They look upon these termination provisions in a benign, if not in a favourable, manner. After all, these provisions state that their future employer will abide by employment standards laws. That sounds like a good thing. But lurking below these provisions is a trap for the uninformed. These provisions appear to give something to the employee, whereas the reality is they’re taking away valuable rights.
These termination provisions shouldn’t be enforceable unless they provide full and easily understandable information as to what the prospective employee is giving up. It shouldn’t be enough for an employer to disclose that the employee is agreeing to employment standards or is giving up common law rights. Employers should provide full disclosure to the point where employees can easily understand precisely what they’re giving up: the difference between what employment standards would provide as compared to common law.
It isn’t enough to say that people shouldn’t sign agreements unless they understand what they’re signing. Forcing people to seek legal advice before accepting a job offer is neither fair nor practical.
Fairness dictates that the courts should nullify these termination provisions unless they meet a minimum threshold of disclosure in a comprehensible manner.
Such a requirement wouldn’t be a great leap. The Ontario Court of Appeal has set out this requirement in cases where employers attempt to inject a termination clause into an already-existing employment relationship.
There’s no rationale for such a requirement to apply only in situations where the employer injects a termination clause into an already-existing relationship but not to one imposed at the outset.
Alan Shanoff was counsel to Sun Media Corp. for 16 years. He currently is a freelance writer for Sun Media and teaches media law at Humber College. His e-mail address is [email protected].
