On August 30, 2019, the Ontario Court of Appeal dismissed the employer’s appeal in Andros v. Colliers Macaulay Nicolls Inc.[1] The Court of Appeal’s decision affirmed a Motion Judge’s finding that a termination provision which provided for severance entitlements below the Employment Standards Act, 2000 (the “ESA”) minimums was not saved by the “failsafe” language included in the termination provision.
This decision adds to a long line of decisions on the enforceability of termination provisions.
Background
The employer in this case, Colliers Macaulay Nicolls Inc., hired the Plaintiff, Mr. Demetri Andros, pursuant to the terms of a written employment agreement containing the following termination provision:
4. Term of Employment
The Company may terminate the employment of the Managing Director by providing the Managing Director the greater of the Managing Director’s entitlement pursuant to the Ontario Employment Standards Act or, at the Company’s sole discretion, either of the following:
- Two (2) months working notice, in which case the Managing Director will continue to perform all of his duties and his compensation and benefits will remain unchanged during the working notice period.
- Payment in lieu of notice in the amount equivalent of two (2) months Base Salary. [Emphasis added]
Upon terminating Mr. Andros’ employment without cause, the company provided Mr. Andros with all of his ESA entitlements, but nothing more. Mr. Andros commenced an action for wrongful dismissal alleging, among other things, that the termination provision in the employment contract was unenforceable.
Mr. Andros argued that the termination provision was unenforceable on the basis that it attempted to contract out of the requirements of the ESA by failing to provide severance pay under 4(a) and failing to provide for severance pay or benefits under 4(b).
The parties agreed to proceed before a Motion Judge by way of summary judgement motion.
The Motion Judge’s Decision
At the summary judgement motion, the company argued that the first part of the clause, which specifically referred to the provision of ESA entitlements also applied to parts 4(a) and 4(b) by virtue of the fact that the whole clause insisted on the “greater” of the entitlements being provided.
The Motion Judge rejected this argument, finding that neither 4(a) nor 4(b) clearly provided ESA entitlements. At best, 4(a) and 4(b) were ambiguous as to the inclusion of ESA entitlements. The Motion Judge then noted that where a termination provision is unclear or ambiguous, courts should prefer the interpretation that favours the employee. The Motion Judge adopted the interpretation of 4(a) and 4(b) in which Mr. Andros was deprived of his ESA entitlements and found the entire provision unenforceable.
In the result, Mr. Andros was awarded a reasonable notice period of eight months.
The Ontario Court of Appeal’s Decision
On appeal, the company relied on the Court of Appeal’s 2018 finding in Amberer v. IBM Canada Ltd that that the failsafe language effectively modified the rest of the termination provision to read it up to comply with the ESA.[2] The failsafe language at the end of the provision stated,
In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of your employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment.[3]
The Court of Appeal rejected the company’s appeal of the award in favour of Mr. Andros. In response to the company’s reliance on Amberer, the Court of Appeal found that the termination provision in Mr. Andros’ employment contract was fundamentally different from the termination provision in Amberer. In the case of Mr. Andros’ employment contract, the reference to ESA entitlements was “stranded in the first clause” by virtue of the disjunctive “or” and as such, did not serve as failsafe language to ensure that ESA entitlements would be included as part of the entitlements set out parts 4(a) and 4(b).[4]
Takeaway for Employers
Although the Ontario Court of Appeal did distinguish this
decision from its decision in Amberer v.
IBM Canada Ltd., it did not overturn the earlier decision. As such,
employers should follow the guidance provided in Amberer v. IBM Canada Ltd., and ensure that failsafe language
applies to the entire termination provision rather than providing a “greater
of” or “either or” entitlement.
[1] Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679 [Andros].
[2] Amberer v. IBM Canada Ltd., 2018 ONCA 571 at para. 54 [Amberer].
[3] Ibid at para. 6.
[4] Andros at para. 30.
