Law Times

Law Times • November 14, 2016 Page 9 www.lawtimesnews.com SCC needs to clarify termination clauses BY MICHAEL MCKIERNAN For Law Times T he Supreme Court needs to step in to dispel grow- ing uncertainty over the enforceability of termi- nation clauses, according to a To- ronto employment lawyer. Stephen Moreau, a lawyer with Cavalluzzo Shilton Mc- Intyre Cornish LLP in Toronto, acted for the plaintiff in Oudin v. Centre Francophone de To- ronto, a case that has set the em- ployment law bar abuzz. Oudin has petitioned the nation's top court for leave to appeal after the Court of Appeal for Ontario upheld a decision to enforce the faulty termination provision in Oudin's contract holding his en- titlements to the statutory mini- mums under the Employment Standards Act. As part of the application for leave, Moreau has studied close to 100 cases that tacked the enforceability of termination clauses since the Supreme Court last weighed in on the issue in 1992. He found that in just more than 50 of the cases, the judge voided the clause, while in just less than 50, the judge came to the opposite conclusion and up- held the clause. "When you have that many cases in a 25-year period and the results are split almost down the middle, that just screams out for attention," Moreau says. "The case law is all over the map on whether these termina- tion provisions are supposed to be interpreted generously or strictly, which makes it nearly impossible to give advice to em- ployees or employers about the enforceability of these clauses. It makes things complicated, and it promotes a great deal of litigation, which is not good for anyone." Daniel Girlando, who rep- resented the CFT at the appeal court, says his client will resist Oudin's leave application be- cause it raises a number of issues not touched on by the appeal court. "I don't know why the Su- preme Court of Canada would start weighing in on a number of issues that don't directly impact on this case," says Girlando, a lawyer with Borden Ladner Ger- vais LLP. The court of appeal's brief decision in Oudin caused a stir because it upheld a decision by Ontario Superior Court Justice Sean Dunphy that appeared to go against a recent line of cases where termination clauses were voided for failing to explicitly state that severance entitlements and benefits continuation will be provided according to the ESA. Although CTF committed only to provide Oudin with the notice period prescribed by the ESA, Dunphy used a severabil- ity provision to cure the defects, based on the intentions of both parties. "Contracts are to be interpret- ed in their context and I can find no basis to interpret this employ- ment agreement in a way that neither party reasonably expect- ed it would be interpreted when they entered into it. "There was no intent to con- tract out of the ESA in fact; to the contrary, the intent to apply the ESA is manifest," Dunphy wrote in his original decision, back in October 2015. The three-judge panel of the appeal court justice sidestepped the severance and benefits issue and instead focused on Dun- phy's framing of the case as a contractual interpretation issue. "The motion judge's decision was based on his interpretation of a contract. He considered the cir- cumstances of parties, the words of the agreement as a whole and the legal obligations between the parties," the panel wrote in the June 28 endorsement. "The motion judge's interpre- tation of the contract is entitled to deference." Moreau says he and his client were "very disappointed" with the appeal court decision, calling the result "untenable." Under the common law, he says, Oudin, a 13-year employee who was 68 at the time of his ter- mination, would have received more than a year of pay and ben- efits. Under the ESA, he was en- titled to just 21 weeks of pay and eight weeks of benefits coverage. "To suddenly be told in two months you could have no health coverage, for someone in their late 60s, that can be quite devas- tating," Moreau says. According to Moreau, ter- mination clauses need to meet a high bar for enforcement due to the significant gap between en- titlements under the ESA com- pared with the common law. "It should require a clause that is very clear, and that an average layperson could understand," he says. "It's hard enough for a layper- son to understand the effect of a termination clause without hav- ing to read a partially defective clause in the light of a further generic savings clause. For him to give up a year of benefits for that clause is a result that I find untenable." However, Sean Porter, a To- ronto lawyer who represents em- ployers in labour and employ- ment matters, says he welcomes the departure from the previous line of case law that voided ter- mination clauses for failure to mention ESA entitlements. "I think there is something to be said for the approach taken in this case where the Superior Court judge took a look at the real intention of the parties, which was not to contract out of the ESA," says Porter, who prac- tises at McCarthy Tétrault LLP. "You don't have to go to great lengths to find a way to invalidate the clause." Jed Blackburn of Cassels Brock & Blackwell LLP says the Court of Appeal's endorsement of Dunphy's "common sense" approach to termination clause interpretation will boost employ- ers, but it is unlikely to signal a major shift in the approach judg- es take to the issue. "In terms of challenging en- forcement clauses, the upper hand is still safely with the employee, but this helps to re-balance the de- bate a little," he says. LT FOCUS ON Labour & Employment Sean Porter says he welcomes the departure from the previous line of case law that voided termination clauses for failure to mention Employment Standards Act entitlements. ORDER YOUR COPY TODAY! Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation THE MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES AND COURTS Ontario Lawyer's Phone Book is your best connection to legal services in Ontario with more than 1,400 pages of essential legal references. You can depend on the accuracy of this trusted directory that includes the most up-to-date names, phone numbers, mailing addresses and emails so you don't have to search anywhere else. 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