Making a termination clause legit

Contractual language must allow for more than just wages to comply with employment standards minimums
By Justin Tetreault
|Canadian Employment Law Today|Last Updated: 04/12/2017

In recent years, the enforceability of termination clauses has been a hot topic in employment law circles as some courts have appeared to take a closer look at them and displayed a greater willingness to strike down clauses that potentially violated the employment standards legislation. Despite the growing body of case law in which termination clauses were found to be unenforceable for various reasons — such as the failure to provide for continued benefits during the employee’s notice period — there were also enough cases demonstrating a more lenient approach that it could be fairly said that the state of the law was uncertain.

In the recent case of Wood v. Fred Deeley Imports Ltd., the Ontario Court of Appeal provided some much-needed clarity about the proper interpretation of termination clauses, demonstrating the strict approach that courts must take in rejecting clauses which contain even potential violations of legislation like the Ontario Employment Standards Act, 2000 (ESA).

Julia Wood commenced employment with Fred Deeley Imports in April 2007.  In April 2015, she was provided with 13 weeks of working notice that her employment would end on Aug. 4, 2015. At the time of the termination of her employment, Wood earned a base salary of $81,041.48. She was also entitled to an annual bonus of up to 14 percent of base salary, a clothing allowance, and was entitled to participate in Fred Deeley’s health, dental and RRSP plans.