Employment Contracts – New Risk for Employers

September 11, 2020 | Articles

Periodically, a legal case goes through the courts that set a significant new precedent in employment law.  When this happens often policies or contracts of employment need to change to ensure they remain compliant and reduce the risk for employers.

The termination clause in your employment contract may be putting you at risk

One key case was Wronko v. Western Inventory, which concluded that an employer could not make a fundamental change to the employment contract, otherwise a constructive dismissal claim could be made. In the Oudin v. Centre Francophone de Toronto case, the argument was that the termination clause did not address the issue of severance or the continuation of benefits, which are requirements under the Employment Standards Act, 2000 (ESA). As such, the clause was deemed invalid.

This latest case, Waksdale v. Swegon North America Inc., has significant impacts for employment contracts. In this particular case, the employment contract had both a clause for termination “with” and “without cause.” Even though the without cause termination clause was valid—it provided the employee with ESA minimums—the employee argued that with cause termination clause was invalid because it violated the ESA and, therefore, the entire termination agreement was invalid. The case ultimately went to the Ontario Court of Appeal and was upheld.

What does this mean?

Even though the employee was terminated without cause and that clause was valid, the with cause termination clause was invalid, so that rendered the entire termination clause invalid.  The court deemed the employee would be entitled to common law notice.

How employers can protect themselves

Because of this case, it is imperative that all employers should review their contracts and make the appropriate modifications to reduce their risk going forward.

If you have questions on this case, would like to see a copy of the case or Court of Appeal decision, or would like assistance with your current employment contracts, please speak with one of our consultants.

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