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| Inna Koldorf |
Termination provisions
For the third year in a row termination provisions were all the rage. Last year’s top five employment law decisions included a nod to the Ontario Superior Court of Justice’s decision in Rahman v. Cannon Design Architecture Inc. [2021] O.J. No. 4769, in which the court disagreed that an unenforceable with cause termination provision automatically renders the without cause termination provision unenforceable.
The court found that since the termination provisions were the subject of specific negotiations between the parties which resulted in material improvements to the employee’s entitlements, there was no basis to apply a strict, or even an adverse construction approach to termination provisions in that case. Employers were jubilant after Rahman was released, but not for long. In June 2022 the Court of Appeal overturned the Superior Court of Justice’s decision.
The Court of Appeal found that the Superior Court of Justice made an error in law when it allowed subjective considerations such as the parties’ intention, sophistication and access to independent legal advice, to override the wording of the termination provisions. The Appeal Court concluded that since the termination with cause provision in the contract at issue violated the Employment Standards Act, 2000 (ESA), the entire termination scheme in the contract was unenforceable, bringing Rahman in line with the Ontario Court of Appeal’s own decision in Waksdale v. Swegon North America Inc.. 2020 ONCA 391, which we included in our 2020 list.
Termination of employment
This past year the Ontario Court of Appeal released two important decisions addressing termination of employment. In Render v. ThyssenKrupp Elevator (Canada) Limited 2022 ONCA 310, the Court of Appeal found that an employee was properly dismissed for cause, but was still entitled to his statutory notice and benefits continuation under the ESA. The Court of Appeal noted that the ESA requires an employee to be provided with notice of termination of employment unless the employee engaged in “wilful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by the employer” (the wilful misconduct standard).
The common law standard of just cause is a lower standard than the wilful misconduct standard, the court noted. Careless, thoughtless, heedless and inadvertent conduct may meet the common law just cause standard, but would not meet the willful misconduct standard, because it is not willful. As a result, it is possible, as was the case in Render, that an employee whose conduct amounted to just cause so as to justify dismissal without reasonable notice in the common law, may still be entitled to their statutory notice in the ESA if their conduct did not meet the higher wilful misconduct standard. To this point, there was nothing new in the Court of Appeal’s description of the law. Although few decisions make the distinction between the common law just cause standard and the ESA wilful misconduct standard, the distinction exists.
However, the Court of Appeal did not stop there. It added that to meet the wilful misconduct standard, the conduct would have to be preplanned. The requirement for the conduct to be preplanned is not contained in the legislation. It elevates the standard from having to be intentional (wilful) but not necessary calculated, to being premeditated. The difference between these two actions became apparent in Render as the Appeal Court accepted the trial judge’s finding that the employee’s conduct which led to the termination of his employment, him slapping a female co-worker’s buttocks, was not accidental, but the Appeal Court found that it was not preplanned, and therefore did not meet the wilful misconduct standard in the ESA.
In another decision on termination of employment, the Appeal Court upheld a decision of the Superior Court of Justice which found that the effect and resulting uncertainties of the COVID-19 pandemic were obstacles to the employee’s efforts to obtain alternate employment, and should therefore be considered when assessing the appropriate notice period. In Pavlov v. The New Zealand and Australian Lamb Company Limited 2022 ONCA 655, the employee’s employment was terminated in May 2020 after almost three years of service. He was a director of marketing at the time. The employee applied to over 100 jobs and worked with a career coach to assist in his job search, but to no avail.
The trial judge awarded him 10 months of reasonable notice after assessing the Bardal factors. She noted that the availability of similar employment, one of the factors she considered, may be affected by prevailing economic factors outside the parties’ control, specifically in this case, the COVID-19 pandemic. The pandemic was an obstacle to the employee’s job search efforts, and the employer ought to have known that this obstacle existed at the time of termination. The effects of the pandemic therefore justified, in part, the lengthy notice period. The employer appealed this decision. In dismissing the appeal on this point, the Appeal Court noted that it did not find an error in the judge’s analysis and conclusions, thereby solidifying the fact that courts may take the economic effects of the pandemic into consideration when assessing the reasonable notice period.
This is part one of a two-part series.
Inna Koldorf is a partner in KPMG Law LLP’s employment and labour law group, where she advises employers on labour, employment and human rights issues.
The opinions expressed are those of the author and do not reflect the views of the author’s firm, its clients, The Lawyer’s Daily, LexisNexis Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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