Can employers restrict notice to minimum amounts?
Background
Can employers restrict notice of termination to the minimum amounts in employment standards act legislation? This question has been considered in two recent cases in which the courts have said that, in most circumstances, employers can.
The case: Roden v. Toronto Humane Society
Several years ago the Toronto Humane Society entered into employment agreements with Diane Roden, the shelter manager, and Karen Mottram, a supervisor. The termination clause contained in their agreements restricted notice of termination to that set out under the Employment Standards Act (ESA). Specifically the provision stated that:
“…the employer may terminate the employee’s employment at any other time, without cause, upon providing the employee with the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation.”
Roden commenced employment in October 1999 and Mottram started in April 2000.
Things proceeded smoothly for the parties until the spring of 2002 when the Humane Society made a change to its policies with respect to the care of stray animals picked up from the City of Toronto.
Roden and Mottram were against the change and repeatedly challenged the Humane Society’s authority to make it. The Humane Society presented them with several legal opinions, which supported the policy change, but the employees refused to follow the humane society’s instructions. As a result, on June 25, 2002, their employment was terminated. At the time of dismissal, Roden was 51 with a salary of $65,000 per year. Mottram was 48 with a salary of $41,000 per year.
Under the ESA and the terms of their employment agreement, both Roden and Mottram would have only been entitled to two weeks of termination pay. But the Humane Society offered Roden an additional 16 weeks of termination pay and offered Mottram an additional seven weeks in exchange for signing releases.
Both women refused these offers and elected to sue the Humane Society for wrongful dismissal. The Humane Society paid out the amounts owing under the ESA and provided them with the applicable benefits but did not pay any further severance monies.
At trial the judge stated that “the failure of the plaintiffs to follow the instructions of senior management of the society amounted to serious misconduct which was willful. Therefore I conclude the plaintiffs were dismissed for cause.” As a result Roden and Mottram were not entitled to any notice of termination.
The court then went on to discuss whether, if the Humane Society did not have just cause for the terminations, the employment agreement would be a bar to any further notice of termination.
The employees’ lawyer argued that because the society had offered to pay more than it was required to under the ESA and the employment agreement, it could not rely on the termination clause in the agreement. The court did not accept this argument.
Instead, the court reviewed the Supreme Court of Canada decision in Machtinger v. HOJ Industries Ltd., in which the judge stated that:
“Absent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the act or otherwise take into account later changes to the act or to the employees’ notice entitlement under the act. Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice.”
Accordingly the question to be addressed was whether it would be unconscionable to uphold the agreements.
The court said the assessment of unconscionability is concerned with the circumstances at the time the parties entered into the agreement and whether those circumstances had changed substantially over time. The court indicated other factors would be relevant to an assessment of unconscionability, including:
•whether the employee had an opportunity to review the contract in a “relaxed environment”;
•whether the employee had an opportunity to seek legal advice;
•the employee’s level of sophistication; and
•whether there had been a significant change in the employee’s responsibilities since the contract was signed.
As there was insufficient evidence to make a finding that the agreements were unconscionable, they were upheld.
For more information see:
• Roden v. Toronto Humane Society [2003] O.J. No.2801 (Ont. S.C.J.)
• Mesgarlou v. 3XS Enterprises Inc. [2002] O.J. No. 4323 (Ont. S.C.J.)
Tips for employers
Although the courts upheld the agreements in these cases, it is clear that where it is unconscionable to do so, they will refuse to give effect to termination clauses that restrict notice to the provisions of the relevant employment standards legislation.
To avoid having your employment agreements declared unconscionable:
•use plain, simple language that the employee can understand;
•explain the meaning of the termination provision verbally and take notes of that discussion;
•specify the exact amount of notice and severance to which the employee is entitled under the applicable employment standards legislation;
•state that the notice period specified in the agreement is the maximum amount to which the employee is entitled;
•give employees as much time as possible to review the agreement and advise them that they may seek legal advice if they so desire; and
•specify that the terms of the agreement continue to apply notwithstanding any changes in responsibilities or other conditions of employment.
This in-depth look at employment agreements and reasonable notice was provided by Lauren M. Bernardi, a lawyer and human resource advisor with the firm of Bernardi Scholz. She can be reached at (905) 274-2305, www.bestlaw.ca or [email protected].
Can employers restrict notice of termination to the minimum amounts in employment standards act legislation? This question has been considered in two recent cases in which the courts have said that, in most circumstances, employers can.
The case: Roden v. Toronto Humane Society
Several years ago the Toronto Humane Society entered into employment agreements with Diane Roden, the shelter manager, and Karen Mottram, a supervisor. The termination clause contained in their agreements restricted notice of termination to that set out under the Employment Standards Act (ESA). Specifically the provision stated that:
“…the employer may terminate the employee’s employment at any other time, without cause, upon providing the employee with the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation.”
Roden commenced employment in October 1999 and Mottram started in April 2000.
Things proceeded smoothly for the parties until the spring of 2002 when the Humane Society made a change to its policies with respect to the care of stray animals picked up from the City of Toronto.
Roden and Mottram were against the change and repeatedly challenged the Humane Society’s authority to make it. The Humane Society presented them with several legal opinions, which supported the policy change, but the employees refused to follow the humane society’s instructions. As a result, on June 25, 2002, their employment was terminated. At the time of dismissal, Roden was 51 with a salary of $65,000 per year. Mottram was 48 with a salary of $41,000 per year.
Under the ESA and the terms of their employment agreement, both Roden and Mottram would have only been entitled to two weeks of termination pay. But the Humane Society offered Roden an additional 16 weeks of termination pay and offered Mottram an additional seven weeks in exchange for signing releases.
Both women refused these offers and elected to sue the Humane Society for wrongful dismissal. The Humane Society paid out the amounts owing under the ESA and provided them with the applicable benefits but did not pay any further severance monies.
At trial the judge stated that “the failure of the plaintiffs to follow the instructions of senior management of the society amounted to serious misconduct which was willful. Therefore I conclude the plaintiffs were dismissed for cause.” As a result Roden and Mottram were not entitled to any notice of termination.
The court then went on to discuss whether, if the Humane Society did not have just cause for the terminations, the employment agreement would be a bar to any further notice of termination.
The employees’ lawyer argued that because the society had offered to pay more than it was required to under the ESA and the employment agreement, it could not rely on the termination clause in the agreement. The court did not accept this argument.
Instead, the court reviewed the Supreme Court of Canada decision in Machtinger v. HOJ Industries Ltd., in which the judge stated that:
“Absent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the act or otherwise take into account later changes to the act or to the employees’ notice entitlement under the act. Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice.”
Accordingly the question to be addressed was whether it would be unconscionable to uphold the agreements.
The court said the assessment of unconscionability is concerned with the circumstances at the time the parties entered into the agreement and whether those circumstances had changed substantially over time. The court indicated other factors would be relevant to an assessment of unconscionability, including:
•whether the employee had an opportunity to review the contract in a “relaxed environment”;
•whether the employee had an opportunity to seek legal advice;
•the employee’s level of sophistication; and
•whether there had been a significant change in the employee’s responsibilities since the contract was signed.
As there was insufficient evidence to make a finding that the agreements were unconscionable, they were upheld.
For more information see:
• Roden v. Toronto Humane Society [2003] O.J. No.2801 (Ont. S.C.J.)
• Mesgarlou v. 3XS Enterprises Inc. [2002] O.J. No. 4323 (Ont. S.C.J.)
Tips for employers
Although the courts upheld the agreements in these cases, it is clear that where it is unconscionable to do so, they will refuse to give effect to termination clauses that restrict notice to the provisions of the relevant employment standards legislation.
To avoid having your employment agreements declared unconscionable:
•use plain, simple language that the employee can understand;
•explain the meaning of the termination provision verbally and take notes of that discussion;
•specify the exact amount of notice and severance to which the employee is entitled under the applicable employment standards legislation;
•state that the notice period specified in the agreement is the maximum amount to which the employee is entitled;
•give employees as much time as possible to review the agreement and advise them that they may seek legal advice if they so desire; and
•specify that the terms of the agreement continue to apply notwithstanding any changes in responsibilities or other conditions of employment.
This in-depth look at employment agreements and reasonable notice was provided by Lauren M. Bernardi, a lawyer and human resource advisor with the firm of Bernardi Scholz. She can be reached at (905) 274-2305, www.bestlaw.ca or [email protected].
| Case of note: Mesgarlou v. 3XS Enterprises Inc. A similar decision was reached in the case of Mesgarlou v. 3XS Enterprises Inc. In that case the termination clause in the employment agreement stated that: “After the first three months of employment, both parties shall give notice in accordance to the Ontario Employment Standards Act prior to terminating this employment agreement.” Mesgarlou was terminated from his employment after working with the company as a sales manager for about one year. He sued for wrongful dismissal. In advancing his claim he argued the contract provision could not be enforced because it was too vague and the employer could not rely on it because it had terminated Mesgarlou’s employment without paying him any notice at all. The court rejected those arguments and said that: “The simple language of paragraph nine is a sufficiently clear and unambiguous provision as to rebut the common law presumption that reasonable notice is required to terminate the employment. It means, in my view, that any termination by either party would require notice in accordance with the Ontario statute.” The court also took note of the fact Mesgarlou had the agreement in his possession for two weeks before he started working with the company and was not in a vulnerable bargaining position with his employer given that he had had the wherewithal to negotiate significant increases in his production bonuses. The court concluded that Mesgarlou simply wasn’t concerned about the termination provision in the agreement. |
