‘Saving Provisions’ Will Not Cure Your Deficient Termination Clause

Every year we analyze countless new cases where the courts have grappled with the enforceability or lack of enforceability in termination clauses. This is for good reason – an enforceable termination clause is likely the single-most important provision in an Employment Agreement. An enforceable termination clause that restricts an employee’s rights upon termination to the minimum standards set out by the Ontario Employment Standards Act, 2000 (“ESA”), greatly minimizes risk and liability for the employer.

However, what happens when the termination clause is unenforceable, yet the Agreement contains a ‘savings provision‘ that ensures that under no circumstance will the employee receive less than their ESA entitlement? This was the question the Ontario Court of Appeal considered in the December 2019 case, Rossman v Canadian Solar Inc. Ultimately, the court found the termination clause was unenforceable notwithstanding the savings language. The court’s justification was simple – ambiguity only serves to benefit the employer upon termination. Allowing savings language gives the employer the option to contract out of the ESA’s minimum standards in hopes that the employee will simply accept the employer’s terms of their termination. Essentially, the court indicated that employees need to be made aware at the outset of the employment relationship, in clear and unambiguous terms, what they will be owed upon termination.

This case only further underlines the importance of having your termination clause and overall Employment Agreements reviewed on a regular basis. As evidenced in Rossman, an enforceable termination clause may mean the difference between providing three (3) weeks’ notice upon termination to the court awarding a whopping five (5) months’ notice plus significant legal costs following a protracted legal battle.

Recommended Posts