Pound v. iWave, 2017 PECA 17, a recent decision by the Prince Edward Island Court of Appeal, is a cautionary tale for employers about the legal issues that may arise when standard form employment policies are adopted without management fully understanding their obligations to employees in practice.read more
Termination Clauses: Nova Scotia Supreme Court Weighs In
In recent years, there have been many decisions on the enforceability and interpretation of termination clauses in employment contracts – which employers and their legal counsel read with both interest and apprehension.
The Nova Scotia Supreme Court has now weighed in on the debate. Like many cases on this topic, the Court’s analysis in Bellini v Ausenco Engineering Alberta Inc., 2016 NSSC 237, centred on the interpretation of the applicable employment standards legislation – the Nova Scotia Labour Standards Code. The termination clause at issue stated, in part:
If it becomes necessary for us to terminate your employment for any reason other than cause, your entitlement to advance working notice or pay in lieu of such notice, will be in accordance with the provincial employment standards legislation.
The dismissed employee, a professional engineer with approximately 3 years of service, argued that the clause was not sufficient to remove his entitlement to reasonable notice. His argument centred on Section 72 of the Code, which states:
72(1) Subject to subsection (3) and Section 71, an employer shall not discharge, suspend or lay off an employee, unless the employee has been guilty of wilful misconduct or disobedience or neglect of duty that has not been condoned by the employer, without having given at least
(b) two weeks’ notice in writing to the person if his period of employment is two years or more but less than five years; [emphasis added]
He argued that the words “at least” in Section 72 established the “floor” for the requisite notice (beneath which the employer cannot go), and not the “ceiling” (or the maximum notice to which an employee is entitled).
As a starting point, the Court noted that clear and express language was required to deprive employees of the right to reasonable notice of termination, and that the Labour Standards Code is remedial and “should add to the rights of employees and not diminish those rights.” (para 13) The Court held that the termination clause was ambiguous at best, and that it would not have been difficult to draft a termination clause that left no doubt as to the parties’ intention to oust common law notice. In the absence of clear language to that effect, the court was not prepared to “apply a strained interpretation to attribute such meaning to contract language that does not specifically say so.” (para 43) Accordingly, the Court concluded that the termination clause did not oust the employee’s entitlement to reasonable notice, and awarded him damages equivalent to 6 months’ notice of termination (approximately 2 months per year of service).
This case, like the others that came before it, again affirms the importance of careful drafting. It is important that employers and their legal counsel pay strict attention to the language of the applicable employment standards legislation and consider its effect on the interpretation of the termination clause. This case again reminds us that termination clauses will typically be interpreted in favour of the employee, and very clear language is required to remove their entitlement to reasonable notice.