Curated Content Canada: Does Your Termination Clause Need To Comply With Statutory Group Notice Provisions?

In its recent decision, Forbes v. Glenmore Printing Ltd.,2023 BCSC 25 ("Glenmore"), the Supreme Court of British Columbia rejected an argument that a contractual termination provision was void due to its potential to breach the requirements of the Employment Standards Act's (the "ESA") group termination provision.

Background – Enforceability of Termination Provisions

At common law, it is a well-established principle that all contracts of indefinite employment are subject to an implied term that they may only be terminated by providing the employee with reasonable notice. This presumption can be rebutted by contractual language that imposes an express and enforceable limitation on the termination entitlements. However, if the contractual provision does not comply with the ESA minimum requirements for individual notice or has the potential of not meeting such requirements, the provision will be found void (Shore v. Ladner Downs, 1998 CanLII 5755 (BCCA) at para. 16).

In Glenmore, the employee, Ross Forbes, was constructively dismissed after 6 years of employment. The only issue before the Court was the amount Forbes was entitled to as a result of the dismissal. Forbes had a written employment agreement that included the following termination provision:

While the Termination Provision complied with the ESA's minimum individual notice requirements, Forbes argued that it was nonetheless void because the 8-week maximum individual notice entitlement violated the minimum statutory notice requirements in the event of a group termination as set out in section 64 of the ESA. Section 64 of the ESA provides that if an employer terminates 50 or more employees at a single location within any 2-month period, each employee is entitled to between 8 and 16 weeks of notice of such termination or pay in lieu, depending on the number of employees affected. Such notice or pay in lieu is in addition to any notice an employee is entitled to pursuant to section 63 (the individual notice provision).

Although Forbes was not part of a group termination and therefore not entitled to any additional notice, he argued that the Termination Provision's theoretical contravention of the minimum requirements of section 64 rendered it void and that he was entitled to reasonable notice at common law (which the parties agreed was 8 months).

Decision

The Court dismissed Forbes' claim, finding that a contractual termination provision only needed to meet the minimum individual notice requirements (rather than both the individual and group notice requirements) to oust the common law entitlement to reasonable notice.

The Court also confirmed that it will not imply that the parties agreed to breach the ESA in the absence of an express term to that effect and, accordingly, because the Termination Provision did not expressly exclude the statutory notice requirements on a group termination, there was no breach of the ESA. Specifically, the Court found where a contract is silent with respect to any other statutory entitlement that may be triggered upon the termination of employment, the employer remained bound to comply with such statutory obligations. In coming to this conclusion, the Court referenced the Ontario Court of Appeal's decision in Nemeth v. Hatch Ltd.,2018 ONCA 7, which rejected an argument that a termination clause's silence on statutory severance pay denotes an intention to contract out of employment standards legislation.

Significance of the Decision and Takeaways for Employers

Historically, the argument that a contractual termination provision violated employment standards legislation has been based on such provision providing (or potentially providing) a lesser notice period than required by the statutory individual notice provisions, such as section 63 of the ESA (see, for example our previous blog on this topic from 2017). Recent decisions in Ontario, however, have moved away from this. Specifically, in Waksdale v. Swegon North America Inc., 2020 ONCA 391, the Court of Appeal confirmed that without cause and just cause termination provisions must be read together and that an otherwise lawful termination without cause provision may be rendered unenforceable due to an termination for cause provision in the employment agreement that was not compliant with employment standards legislation. The Ontario Superior Court of Justice took this one step further in Henderson v. Slavkin et al., 2022 ONSC 2964 when it concluded that invalid confidentiality and conflict-of-interest penalty clauses, which if breached could lead to the termination of the employee for cause, rendered an otherwise lawful termination without cause provision unenforceable. We discussed the Waksdale decision on this blogin 2020.

Glenmore, on the other hand, upholds the generally accepted and understood principle (at least outside of Ontario) that: (i) to oust the common law entitlement to reasonable notice, the contractual term must only meet the minimum statutory requirements to individual notice, rather than any other statutory termination requirement, and (ii) the common law will not imply a contractual term that is contrary to the ESA. This is consistent with prior decisions of the British Columbia courts, including the British Columbia Court of Appeal's decision in Miller v. Convergys CMG Canada Limited Partnership, 2014 BCCA 311, where the Court rejected the argument that a severable probationary period that violated the ESA rendered the balance of the agreement, particularly the termination clause and severance clause, unenforceable.

While Forbes had filed an appeal of the Court's decision, it was abandoned on or about March 2, 2023.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.