|Canadian Employment Law Today

The effect of bankruptcy on employment contracts

Re Optenia Inc. (2002), 21 C.C.E.L. (3d) 44 (Ont. S.C.J.)

In this case, Optenia Inc. placed itself into bankruptcy, seeking protection from its creditors. The court considered the effect such a voluntary assignment into bankruptcy has on the termination provisions contained in various employment contracts. The employment agreements in question each defined a “termination without cause” as occurring when: “Optenia terminates your employment without just cause.” The contracts provided for payment of a specific sum upon termination without cause. Just cause was defined as any grounds at common law for which an employer was entitled to dismiss an employee summarily.