Without Cause Termination Provisions: The Potential Ace in an Employer’s Hand

June 24, 2020

The New Brunswick Court of Queen’s Bench has recently clarified the law regarding without cause termination provisions. The decision, Stéphane Vienneau v. Joy Global (Canada) Ltd., 2020 NBQB 76, explains that a properly worded termination provision is valid and enforceable even if it limits the employee’s entitlements to those set out in the Employment Standards Act, SNB 1982, c E-7.2.

Background

Stéphane Vienneau was hired by Mining Technologies Inc. (“MTI”) in 1998. He worked there until June 2006, when he resigned and went to work elsewhere. He returned to MTI 14 months later. Upon his return, Mr. Vienneau signed a new employment contract which provided, that if he were to be terminated without cause he would be entitled to “advance notice of termination as set out under the Employment Standards Act of Ontario”.

In 2014, MTI entered into an asset purchase agreement with Joy Global (Canada) Ltd. (“Joy Global”). Joy Global offered employment to some of MTI’s employees, including Mr. Vienneau. He accepted their offer, and signed a new contract of employment. The contract included a termination clause that provided that Joy Global would be entitled to terminate him without cause “upon the provision of reasonable notice or payment in lieu that meets the requirements of the applicable employment or labour standards legislation”.

In 2018, Joy Global notified Mr. Vienneau that it would be relocating its Bathurst office to Ontario. He was advised he could accept a new position in Ontario, or he would be terminated without cause. Mr. Vienneau opted for termination without cause, but took the position he was entitled to “severance” above and beyond the requirements set out in the Employment Standards Act.

Mr. Vienneau commenced an action against Joy Global, claiming he was terminated without cause and without reasonable notice at common law. Joy Global maintained that Mr. Vienneau’s employment contract entitled him to only the four week minimum under the Employment Standards Act.

In his motion for summary judgment, Mr. Vienneau asserted he was entitled to common law reasonable notice instead of the statutory minimum for the following reasons:

  •  His contract with Joy Global was void on the basis that it was a continuation of his contract with MTI, and he did not receive fresh consideration for accepting the more onerous termination clause.
  • The termination clause was ambiguous and therefore unenforceable.

Decision

The Court held that Joy Global was not a successor company to MTI. It had no legal obligation to hire Mr. Vienneau, but when it did, he was offered – and accepted – a new contract of employment. That offer of employment amounted to consideration for the new termination clause.

Both parties agreed that in order for a termination provision to be enforceable, it must be clear and unambiguous. The clause in question provided as follows:

The Company shall be entitled to terminate your employment without just cause for any reason upon the provision of reasonable notice or payment in lieu that meets the requirements of the applicable employment or labour standards legislation. By signing this Employment Agreement, you agree that upon the receipt of your entitlements and benefits in accordance with such legislation, no further amounts will be due and payable to you whether under statute or common law. [emphasis added]

The Court found that the termination clause was sufficiently clear and unambiguous to rebut the common law presumption of reasonable notice. The language of the provision confirmed the parties’ intentions that the “notice” to which Mr. Vienneau was entitled was the minimum notice provided for by statute and not reasonable notice at common law.

The Court held that the termination clause in Mr. Vienneau’s contract limited his entitlement upon a termination without cause to the minimum amounts required under the New Brunswick Employment Standards Act and that it was a valid and enforceable provision. Mr. Vienneau was therefore entitled to 4 weeks’ pay in lieu of notice and nothing more.

Lesson for Employers

Employment contracts are of significant value to both employees and employers as they expressly stipulate the terms and conditions of employment so that both parties understand what has been agreed to. A without cause termination provision can be particularly important to employers as such provisions, when properly drafted, can rebut the presumption of common law reasonable notice that would otherwise apply. This has the ability to significantly limit an employer’s potential liability. It also, in theory, alleviates the debate as to what an employee’s entitlements are upon a termination without cause.

Employment contracts must comply with the applicable employment standards legislation. The New Brunswick Employment Standards Act requires that an employee who is terminated without cause be given a minimum of two weeks’ or four weeks’ notice, or pay in lieu, depending on how long they have been employed.

Employers and employees cannot agree to a contract that provides for less than the statutory minimums. They may, however, agree that the employer will not pay more than the statutory minimum and may specifically contract out of the implied term of common law reasonable notice. To do so, the wording of the contract must be clear and unambiguous.

While courts have said that no particular form of words is required to exclude common law reasonable notice, the cases are clear that it is crucial to consider both the specific words used and the context in which they appear, i.e. the full text of the clause. Where a termination clause is unclear, ambiguous, or internally inconsistent, an employer runs the risk that it will be found invalid, which may lead to expensive and unintended results.

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