Torkin Manes

torkinmanes.com F O C U S O N E M P L OY M E N T L A W Employment Contracts: The Risks of Imperfection Peter C. Straszynski Two recent decisions of the Ontario Court remind employers of the importance of using precisely crafted termination clauses in their employment agreements. Increasingly Generous Notice Periods Employees who are terminated without just cause are entitled to advance notice of termination or payment in lieu of notice. In the absence of a binding written termination provision limiting these entitlements, the common law entitles employees to "reasonable" advance notice of termination or payments instead. Ontario courts have historically considered 24 months notice to represent the upper limit on awards of reasonable notice. This upper ceiling has been typically reserved for the most extreme cases. More recently, however, our courts have indicated a readiness to exceed this traditional maximum in exceptional circumstances. The Ontario Court's decision in Hussain v. Suzuki Canada Ltd. is an example of one such case. When Hussain's employment was terminated, he was 65 and had accumulated 36 years of service with Suzuki in a supervisory capacity. There was no allegation of just cause. The Court found that Hussain's circumstances were the kind of "exceptional" facts permitting an award in excess of Focus Facts Would it surprise you to know that your employees, after departure and in the absence of a written contractual prohibition, are allowed to immediately compete directly with you and even actively solicit your customers and business? Unless the employee falls within the limited definition of employees who are considered "fiduciaries" of the company, a binding term is required in the employment contract to prevent such activity. Innefective Termination Clauses In Wright v. Young and Rubicam Group of Companies, Wright had been employed for about five years, most recently as President, when his employment was terminated without just cause. The employer sought to rely on the terms of Wright's written contract of employment, which limited his entitlements on termination. Wright, however, challenged the enforceability of the contractual provision in Court. Specifically, while the contract appeared to meet minimum statutory (Employment Standards Act, 2000) notice requirements at the time of termination, it would have failed to have met such standards at certain points in the future. The Court agreed with Wright, relying on a line of decisions holding that the future failure of a contract to comply with statutory minimum requirements may render the contract invalid from the beginning. The Court, consequently, struck down the contractual termination provision as unenforceable and awarded Wright 12 months pay in lieu of notice of termination instead of the 13 weeks of salary in lieu of notice required by the contract. The Wright case illustrates the importance of care and expertise in drafting termination provisions to ensure that they are never at risk of violating minimum employment standards. Wise employers will have their forms of employment agreement reviewed by experienced counsel from time to time to make sure that termination clauses remain compliant with current employment law. Peter Straszynski is a partner in Torkin Manes' Labour & Employment Law Group. He assists employers with all of their labour and employment issues, from the hiring to the post-termination stages of employment, in Contact any member of our Labour Relations and Employment Law Group for more information. 6 the historical maximum, and granted him 26 months notice or pay instead. The Hussain decision reminds employers that long-service employees terminated without cause often require a generous (and perhaps unanticipated) payout, and that employers may not be able to expect that their exposure will be limited by the traditional 24-month "cap" on notice awards. both the union and non-union settings. He can be reached at 416 777 5447 or pstraszynski@torkinmanes.com. c l i e n t - f o c u s e d s o l u t i o n s®

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