Perhaps the most important clause in any employment contract is the termination clause. Without it, an employee is entitled to reasonable notice of termination (in the absence of just cause). A written termination clause can even allow an employer to limit notice (or severance in lieu of notice) to what is required under the applicable employment standards legislation – the absolute minimum required by law.
However, drafting enforceable termination clauses can be tricky. A number of decisions across Canada have put the fear into employers’ lawyers to ensure that these clauses are not only clear and concise (which all contracts should be anyway) but consistent with every aspect of the employment standards legislation requirements. Lawyers for employers in BC might be able to breathe a little easier, though, in light of a couple of cases in the last 18 months in which the BC courts found termination clauses to be enforceable, even in otherwise less-than-perfect contracts.
In 2014, the BC Court of Appeal in Miller v. Convergys CMG Canada Limited Partnership upheld the enforceability of a termination provision that limited notice/severance to the requirements of the BC Employment Standards Act. The termination clause was worded very simply: “[The employer] may terminate your employment for cause, or by providing you with notice, or pay in lieu of notice in accordance with the Employment Standards Act of British Columbia.” The contract, however, included a misplaced and inapplicable probationary clause which the employee’s lawyer argued that, when taken together with the termination clause, resulted in the termination clause being inconsistent with the requirements of the Employment Standards Act. The employee’s lawyer also argued that the combination of the misplaced/inapplicable probationary clause and the termination clause resulted in the contract being ambiguous (and therefore the termination clause was unenforceable). The Court of Appeal disagreed and upheld the enforceability of the termination clause. The employee’s claim was dismissed.
More recently, in Damani v. Stuart Olson Construction Ltd., the BC Supreme Court upheld a termination provision which was far more complicated. The clause read:
After your probationary period, [the employer] shall be entitled to terminate your employment at any time without just cause on giving you notice of the termination or, at [the employer’s] absolute discretion, by paying you compensation in lieu of notice of an amount equivalent to the regular wages that you would have received during the applicable notice period, or any combination thereof. Your notice, or payment in lieu of notice, will be calculated from the Start Date and [the employer] shall provide you with 2 weeks’ for every year (or part year) worked with [the employer], to a maximum of 3 months’ notice or pay, or your entitlement for termination notice or termination pay pursuant to the applicable employment standards legislation, as amended, whichever is greater.
In other words, the employee was entitled to 2 weeks’ notice/severance per year of service, up to a maximum of 3 months’ notice/severance.
The employee’s lawyer argued that the termination clause was “unclear, convoluted and confusing”. Despite the language of the termination provision being “long and complicated” (in the words of the trial judge), it was nevertheless clear and unambiguous. The clause was upheld and the employee’s claim was dismissed.
These cases seem to reflect the BC Courts’ willingness to take a practical approach to the interpretation of termination clauses. We certainly don’t recommend that employers try to draft these clauses without legal advice, since there are still many issues that can render a termination clause useless, but hopefully this trend of upholding termination provisions in less than perfect contracts continues.