Court File and Parties

COURT FILE NO. CV-19-00612797

DATE: 20191003

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BENJAMIN WAKSDALE, Plaintiff

– AND –

SWEGON NORTH AMERICA INC., Defendant

BEFORE: E.M. Morgan J.

COUNSEL: Philip White and Jason Wong, for the Plaintiff

Landon Young and Frank Portman, for the Defendant

HEARD: October 2, 2019

MOTION FOR SUMMARY JUDGMENT

[1] The Plaintiff has sued the Defendant for damages for wrongful dismissal. He claims 6 months’ pay in lieu of notice for his 8 months of employment with the Defendant. The Plaintiff moves for summary judgment under Rule 21.01 of the Rules of Civil Procedure, seeking payment of his damages. The Defendant likewise seeks summary judgment dismissing the action.

[2] The Defendant produces and distributes energy efficient ventilation and indoor climate systems. The Plaintiff is 42 years old. He was employed by the Defendant as its Director of Sales – Vibration Isolation & Restraints, at a base salary of $135,000 per year plus expenses and the possibility of an annual bonus upon his achievement of certain performance metrics. Plaintiff’s counsel describes his overall annual income as somewhere just short of $200,000. He is experienced in various aspects of the technology with which he deals, and is a sophisticated employee who specifically bargained over his bonus and other related provisions of his employment arrangement.

[3] The Plaintiff’s employment commenced on January 8, 2018. He was terminated without cause on October 18, 2018.

[4] The parties entered into an employment agreement dated December 20, 2017 (the “Agreement”) which set out the terms of the employment relationship. The Agreement contained the following clause that applied in the event his employment was terminated without cause:

Termination of Employment with Notice

You agree that in the event that your employment is terminated without cause, you shall receive one week notice or pay in lieu of such notice in addition to the minimum notice or pay in lieu of such notice and statutory severance pay as may be required under the Employment Standards Act 2000 as amended. All reimbursement for business expenses shall cease as of the date of termination of your employment, however, you shall be reimbursed for legitimate business expenses that have been incurred and submitted to the Company but not as yet paid you to that date. The terms of this section shall continue to apply notwithstanding any changes hereafter to the terms of your employment, including, but not limited to, your job title, duties and responsibilities, reporting structure, responsibilities, compensation or benefits.

[5] The Agreement also contained a “Termination for Cause” provision. The Plaintiff submits that this provision breached the terms of the Employment Standards Act, 2000, SO 2000 c 41 (“ESA”) and was therefore void and unenforceable. The Defendant concedes that this clause violated the ESA and is unenforceable, but says that it is in any case irrelevant to the current dispute as the Plaintiff was not terminated for cause.

[6] There is also a severability clause in the Agreement. That provision makes any illegal clause severable from the rest, in the following terms:

You agree that if any covenant, term, condition or provision of this letter outlining the offer of employment with the Company is found to be invalid, illegal or incapable of being enforced by a rule of law or public policy, all remaining covenants, terms conditions and provisions shall be considered severable and shall remain in full force and effect.

[7] It is the Plaintiff’s position that the unenforceability of the Termination for Cause provision impacts on the Agreement beyond that one clause. Plaintiff’s counsel submits that the defective clause renders the entire Agreement – or, at the very least, both Termination provisions in the Agreement – void and unenforceable. Counsel for the Plaintiff bases this position on the Court of Appeal’s ruling in North v Metaswitch Networks Corporation, 2017 ONCA 790, para 41, which provided some guidance on the approach to be taken to whether an illegal termination clause can be severed. The Court reasoned that the first step is to determine what it is that the clause will be severed from, and if the offending clause stands on its own then no severance is possible:

…first assess the termination clause to see whether there is any contracting out of an employment standard. If there is, then the termination clause is void, and there is nothing to which the severability clause can be applied.

[8] Plaintiff’s counsel stresses that the ESA is remedial legislation: ibid., para 36. As the Supreme Court of Canada has pointed out, the ESA is designed to protect employee rights and should be read that way. “One of the purposes of the Act is to ensure that employees who are discharged are discharged fairly”: Machtinger v HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 SCR 986, para 31.

[9] This perspective on the ESA has led the courts to the view that cases should be decided in a way that incentivizes employer compliance with the statute. The Court of Appeal has observed, “If employers can always remedy illegal termination clauses by making payments to employees on termination of employment, then employers will have little incentive to draft legal and enforceable termination clauses at the beginning of the employment relationship”: Wood v Fred Deeley Imports Ltd., 2017 ONCA 158, para 41.

[10] The remedy that courts have come up with is to refuse to enforce the illegal termination clause. As stated by the Court in North, para 45: “I would therefore hold that s. 5(1) of the ESA makes the severability clause, para 17(a), inoperative on the termination clause, which contracts out of an employment standard.”

[11] Counsel for the Defendant points out that the cases relied on by the Plaintiff do not address the situation where there are two distinct termination provisions in the Agreement, one for termination without cause and one for termination with cause. While the Defendant concedes that the Termination for Cause clause is void for violating the ESA, Defendant’s counsel submits that that violation does not touch on the Termination of Employee with Notice clause. It is the latter clause that is relevant to the way in which the Plaintiff was terminated by the Defendant.

[12] The Defendant argues that since the Plaintiff was terminated without cause, the clause in the Agreement governing termination with cause is irrelevant to the current dispute and therefore plays no part in defining the parties’ respective rights and obligations. This position is illustrated by the decision of Brown J. in Khashaba v Procom Consultants Group Ltd., 2018 ONSC 7616. Like here, the employee, who was terminated without cause, argued that the termination for cause clause in his employment agreement invalidated the entire termination portion of the agreement, including the termination without cause clause.

[13] Brown J. rejected this argument, reasoning that non-compliance with the ESA in one of the clauses will not void the entire employment agreement, and that the remainder of the agreement’s clauses, including the termination without cause provision, remain valid and enforceable. In Justice Brown’s analysis, ibid., paras 63-64:

I interpret the references in the case law to a single violation of the ESA rendering an ‘entire termination clause’ void to mean that the entire clause which contains the illegality should be void. No words or sentences in the clause containing the illegality should be valid or enforceable for any purpose. In this context, the entirety of the ‘Termination for Cause’ clause should be void.

The other clauses of the ‘Early Termination’ provision remain valid and enforceable. This result accords with the objectives of the ESA. The ‘Termination Without Cause’ provision does not violate the ESA. It also contains explicit language showing the parties’ intent that it should comply with the ESA. The other clauses in the ‘Early Termination’ provision do not relate to the manner in which an employer can terminate an employee’s employment. There is no reason why they should not remain valid and enforceable.

[14] Defendant’s counsel submits that the Khashaba case is readily distinguishable from those cases on which the Plaintiff relies where the entire termination provision was contained in one clause. For example, in Amberber v IBM Canada Ltd., 2018 ONCA 571, para 59, the Court of Appeal held that a clause cannot be further subdivided into its constituent parts. Likewise, in North, para 40, the Court indicated that what is to be avoided in determining whether severance is appropriate is the re-writing of a termination provision.

[15] Here, as in Khashaba, the Termination of Employment with Notice clause does not require re-writing in any way. It is a stand-alone clause, and is enforceable without reference to the Termination with Cause clause. Nothing further needs to be done to ‘save’ the Termination of Employment with Notice clause, as it is enforceable on its own express terms.

[16] While I agree with Plaintiff’s counsel that employment agreements are generally to be interpreted as delineating and enforcing employees’ rights, “this principle cannot be stretched to the point of finding ambiguity where none exists”: Lopez v EMD Inc., 2017 ONSC 7716, para 32. The Termination of Employment with Notice clause is unambiguous, enforceable, and stands apart from the Termination for Cause clause. Indeed, the Termination for Cause clause itself specifically states that it applies only “[i]f the Company terminates your employment pursuant to this Section…”

[17] There is no need to sever anything here as by its own terms the Termination for Cause provision does not apply to the present case. It is only the Termination of Employment with Notice clause which applies here, and there are no grounds on which to challenge the enforceability of that clause. It does not contravene the ESA, and is therefore valid and enforceable as written and agreed to.

[18] I pause here to note that Plaintiff’s counsel has argued that the impugned provision of an employment agreement must be analyzed as at the moment of contracting, not at the time of breach. Thus, for example, in Covenoho v Pendylum Ltd., 2017 ONCA 284, para 7, the Court of Appeal observed that, “If a provision’s application potentially violates the ESA at any date after hiring it is void.” Similarly, in Wood v Fred Deeley Imports Ltd., 2017 ONCA 158, para 45, the Court of Appeal stated that, “an employer’s conduct on termination, or during the notice period, [cannot] remedy an otherwise illegal and unenforceable termination clause.”

[19] These cases certainly make policy and logical sense; an employer who has presented an employee with an invalid clause cannot make that clause valid by subsequent conduct. The cases are premised on the termination clause being contrary to the ESA, and therefore void, in the first place. In that type of situation, nothing the employer subsequently does can fix the breach.

[20] That, however, is not this case. The Defendant does not seek to invoke or to in some way remediate the invalid Termination with Cause clause. Rather, it invokes, and seeks to enforce, the Termination of Employment for Notice clause on the very terms on which it was agreed. That clause was valid when the Agreement was entered into and remains valid upon the Plaintiff’s termination.

[21] I understand why the Plaintiff finds the Agreement to be a difficult one. He has done a diligent job search and has apparently applied to somewhere in the range of 100 different positions since being terminated by the Defendant. To date he has had 11 interviews, but is still searching for employment in his field (broadly defined) either at his previous level or lower. Plaintiff’s counsel submits that under these circumstances, where the availability of similar employment is sparse, this becomes a key factor in assessing the quantum of damages at common law: see Nemirovski v Socast Inc., 2017 ONSC 5616, para 12. Were it not for the Termination of Employment with Notice clause, the Plaintiff would be entitled to substantially more money than under the Agreement.

[22] That said, the Defendant has acted within its rights under the Agreement. It has paid the Plaintiff two weeks’ severance pay plus his applicable car allowance. That is considerably less than what the Plaintiff would be entitled to at common law, but is more than the bare minimum payable under the ESA. It complies precisely with the Defendant’s obligations under the Termination of Employment with Notice clause in the Agreement.

[23] The Plaintiff has been paid in full under a valid and enforceable clause in the Agreement. Accordingly, there is no genuine issue requiring a trial. In these circumstances, a trial is not the default procedure, but rather the matter can be disposed of by way of summary judgment: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87. para 43.

[24] The action is dismissed.

[25] The Defendant is entitled to costs. Counsel for the Defendant has submitted a Bill of Costs in which he seeks $26,903.66 plus applicable HST. Counsel for the Plaintiff has submitted a Bill of Costs in which he would seek a total of $15,596.63 including HST.

[26] Although there was an interesting point of law raised by this case which was well researched by both sets of counsel, the motion was not otherwise a complicated one. I am mindful of the guidance provided in Rule 57.01(1)(0.b) that in fixing costs a court should take into account the extent to which one party may be taken by surprise at the other’s costs request. While the Defendant’s costs are not excessive, and I hesitate to second guess successful counsel who invested the time and effort needed to win the case, the Plaintiff here might be justified in seeing a costs award that is almost double his own as being somewhat disproportionate.

[27] Costs, of course, are always discretionary under s. 131 of the Courts of Justice Act, RSO 1990, c 43. Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 OR (3d) 291 (Ont CA), at paras 26, 37. I am inclined to exercise my discretion to bring the Defendant’s costs more into line with what the Plaintiff’s Bill of Costs reflects.

[28] The Plaintiff shall pay the Defendant $16,000 in costs of the motion and the action, inclusive of all fees, disbursements, and HST.

Date: October 3, 2019 Morgan J.