Background Facts

[1] This is an application for determination of rights arising pursuant to an employment contract between the parties. Specifically, the court has been asked to determine if the instant termination clause is enforceable, and if not, what damages the applicant is entitled to. That termination clause reads as follows:

PROBATION AND TERMINATION

All new employees on six-months’ probation

Employment may be terminated during the six-month probationary period for any reason. It is understood that you will have no entitlement to common law notice of termination. If, in the circumstances, the Employment Standards Act of Ontario requires notice of termination or pay in lieu of notice, it is understood that the minimum period of notice or pay in lieu of notice specified in the Act will be provided and will constitute your complete entitlement to notice of pay in lieu thereof.

Following the six-month period and a satisfactory performance review, you will be confirmed as a full-time employee of the Company.

Employment may be terminated for cause at any time, without notice.

In the event that employment is terminated for any other reason, it is understood that you will have no entitlement to common law notice of termination. However, you will be provided with notice of termination or pay in lieu thereof and, if applicable, severance pay, both in accordance with the Employment Standards Act of Ontario or any successor legislation. With respect to notice of termination or pay in lieu thereof, it is understood that the minimum period of notice or pay in lieu thereof specified in the Act will be provided and will constitute your complete entitlement to notice or pay in lieu thereof.

[2] It is uncontested that this is an appropriate case for an application. This matter relates to the interpretation of an employment contract and material facts are not in dispute.

[3] The applicant, Ms. Lamontagne, is a well-educated, bilingual chartered accountant who was employed by the respondent, J.L. Richards & Associates Limited, from November 2013 to February 19, 2020; about six and one quarter years. She was hired as assistant controller, and as expected, quickly progressed to controller, overseeing a staff of about eight. She was responsible for her employer’s accounting and reported to a vice-president.

[4] The applicant was 36 years old when her employment was terminated without cause. The respondent paid the applicant all amounts owing to the date of her dismissal and relied on the above termination clause to only pay for notice of termination the amounts owing under the Employment Standards Act, 2000, S.O. 2000, C. 41 (“ESA”); it is uncontested that all amounts owing under the ESA were paid to the applicant.

Issue

[5] At issue is whether common law notice was also payable or whether common law notice was unavailable because it had been excluded by the above termination clause which provides no entitlement to common law notice of termination. As discussed below, this begs an inquiry into the validity of the termination clause. If the clause is valid and sufficiently clear, then common law notice is rebutted by the clause and unavailable, but if the clause is invalid or ambiguous, then common law notice is not rebutted by the clause and the applicant was entitled to common law notice of termination.

General Principles

[6] In Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, the Supreme Court explains that the history of the common law principle that a contract for employment for an indefinite period is terminable only if reasonable notice is given is longstanding, going back at least to 1562 (par. 19). There is, correspondingly, a presumption at common law that a contract of employment for an indefinite term is terminable only on reasonable notice, and that presumption can only be rebutted by clear language that complies with the minimum statutory notice provisions of the ESA; if it does not, then the presumption of reasonable notice is not rebutted.

[7] In North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, the Court of Appeal provides a very helpful overview of applicable principles at paras. 18, 19, 21, and 24:

18 In Wood, Laskin J.A. set out the principles that govern the payment owed to an Ontario employee whose employment is terminated without cause. He summarized the law as follows, beginning at paras. 15-16:

At common law, an employee hired for an indefinite period can be dismissed without cause, but only if the employer gives the employee reasonable notice. In Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 998, the Supreme Court characterized the common law principle of termination of employment on reasonable notice “as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice”.

Ontario employers and employees can rebut the presumption of reasonable notice by agreeing to a different notice period. But their agreement will be enforceable only if it complies with the minimum employment standards in the ESA. If it does not do so, then the presumption is not rebutted, and the employee is entitled to reasonable notice of termination.

19 And continuing at paras. 25-28:

The question of the enforceability of the termination clause turns on the wording of the clause, the purpose and language of the ESA, and the jurisprudence on interpreting employment agreements. That jurisprudence is now well-established. I will summarize it briefly.

In general, courts interpret employment agreements differently from other commercial agreements. They do so mainly because of the importance of employment in a person’s life. As Dickson C.J.C. said in an oft-quoted passage:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

As important as employment itself is the way a person’s employment is terminated. It is on termination of employment that a person is most vulnerable and thus is most in need of protection.

The importance of employment and the vulnerability of employees when their employment is terminated give rise to a number of considerations relevant to the interpretation and enforceability of a termination clause:

• When employment agreements are made, usually employees have less bargaining power than employers. Employees rarely have enough information or leverage to bargain with employers on an equal footing.

• Many employees are likely unfamiliar with the employment standards in the ESA and the obligations the statute imposes on employers. These employees may not seek to challenge unlawful termination clauses.

• The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that “encourages employers to comply with the minimum requirements of the Act” and “extends its protections to as many employees as possible”, over an interpretation that does not do so.

• Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship.

• A termination clause will rebut the presumption of reasonable notice only if its wording is clear. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment.

• Faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee.

21 Most importantly, in Wood, at para. 21, the court explained the effect of the principles established by the Supreme Court in Machtinger regarding the consequences of s. 5(1) of the ESA:

Contracting out of even one of the employment standards and not substituting a greater benefit would render the termination clause void and thus unenforceable, in which case [the employee] would be entitled to reasonable notice of termination of her employment at common law.

24 The severability clause directs that the part of the agreement that is to be severed is the part that a court would find to be illegal. The rule from Wood, following Machtinger, is that where a termination clause contracts out of one employment standard, the court is to find the entire termination clause to be void, in accordance with s. 5(1) of the ESA. It is an error in law to merely void the offending portion and leave the rest of the termination clause to be enforced.

[8] Following up on the above, the Court of Appeal indicated in Rossman v. Canadian Solar Inc., 2019 ONCA 992, 444 D.L.R. (4th) 131, at paras. 18 and 20:

18 As this Court has stressed repeatedly, if a provision within a termination clause conflicts with the minimum standards prescribed by the ESA, it is not open to this court to simply strike out the offending provision. In that situation, the entire termination clause is void. If even one provision contravenes the ESA and fails to “[substitute] a greater benefit”, that alone will render the termination clause void and unenforceable: Wood, at para. 21; Andros, at para. 20.

20 It is well-established, as Laskin J.A. reiterated in Wood, that “courts interpret employment agreements differently from other commercial agreements”: at para. 26. There are significant reasons for this distinction.

[9] In Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, at para. 8, the Court of Appeal reiterated the above and indicated very clearly, while referencing the above decision of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481:

Laskin J.A. went on to observe that the enforceability of a termination provision in an employment contract must be determined as at the time the agreement was executed. The wording of the contract alone should be considered in deciding whether it contravenes the ESA, not what the employer might have done on termination: Wood, at paras, 43-44. Thus, even if an employer’s actions comply with its ESA obligations on termination, that compliance does not have the effect of saving a termination provision that violates the ESA.

[10] The issue in Waksdale was whether the invalid termination “for cause” clause should be considered separately from the valid termination “without cause” clause. The employer argued that where there are two discrete termination provisions, which, by their terms apply to different situations, courts should consider whether one provision impacts the other and whether the provisions are “entangled” in any way. The employer further argued that if they are not, there is no reason why the invalidity of one should impact the enforceability of the other. The Court of Appeal disagreed and indicated the following at paras. 10-12:

10 We do not give effect to that submission. An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked. Here the motion judge erred because he failed to read the termination provisions as a whole and instead applied a piecemeal approach without regard to their combined effect.

11 Further, it is of no moment that the respondent ultimately did not rely on the Termination for Cause provision. The court is obliged to determine the enforceability of the termination provisions as at the time the agreement was executed; non-reliance on the illegal provision is irrelevant.

12 The mischief associated with an illegal provision is readily identified. Where an employer does not rely on an illegal termination clause, it may nonetheless gain the benefit of the illegal clause. For example, an employee who is not familiar with their rights under the ESA, and who signs a contract that includes unenforceable termination for cause provisions, may incorrectly believe they must behave in accordance with these unenforceable provisions in order to avoid termination for cause. If an employee strives to comply with these overreaching provisions, then his or her employer may benefit from these illegal provisions even if the employee is eventually terminated without cause on terms otherwise compliant with the ESA.

[11] Additional relevant general principals of interpretation are found in the Court of Appeal decision of Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679, 437 D.L.R. (4th) 546, at paras. 18-20:

18 There is a common law presumption that an employee’s dismissal without cause will only take place on reasonable notice to that employee. That presumption is rebutted only “if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly” (emphasis added): Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 998; Wood, at paras. 15, 28. If the common law presumption of reasonable notice has not been clearly rebutted, then the employee is entitled to pay in lieu of notice for the reasonable period under the common law.

19 The ESA contains employment standards distinct from those at common law. An employment standard is defined in s. 1(1) to mean a “requirement or prohibition” under the ESA that applies to an employer for an employee’s benefit. Subsection 5(1) of the ESA prevents employers, employees and their agents from contracting out of or waiving “an employment standard”. The length of notice of termination, the payment of benefits during notice periods, and the payment of severance all constitute “requirements” applying to an employer for an employee’s benefit, and therefore constitute employment standards. These employment standards cannot be contracted out of unless the contract is for a “greater benefit” than what the ESA provides for: ESA, s. 5(2).

20 It is not possible to simply void the part of a termination clause that offends the ESA. If a termination clause purports to contract out of an employment standard without clearly substituting a greater benefit in its place, the entire termination clause is void: North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, at para. 24; Hampton Securities Limited, at para. 7. As Laskin J.A. said in Wood, at para. 21: “Contracting out of even one of the employment standards and not substituting a greater benefit would render the termination clause void and thus unenforceable”: see also paras. 64, 69. This is true even if the employee actually receives his or her statutory entitlements after termination. Accordingly, the enforceability of a termination clause is determined by the wording of the clause alone, not by an employer’s conduct after termination: Wood, at paras. 43-44.

[12] With regards to silence about ESA requirements, the Court of Appeal stated the following at paras. 33 – 38 of Andros:

33 The appellant relies upon Roden v. Toronto Humane Society (2005), 2005 CanLII 33578 (ON CA), 202 O.A.C. 351 (C.A.), and Nemeth in support of the proposition that silence about ESA entitlements does not entail a contracting out of those entitlements. In other words, the appellant says that the motion judge erred by essentially reading in a clause that excluded the respondent’s entitlement to severance pay under clause 4(a) and benefits continuation under clause 4(b).

34 I agree with the motion judge that Roden and Nemeth are distinguishable from this case. In both Roden and Nemeth, the applicable termination clauses referred explicitly to ESA entitlements, but only in respect of notice or payment in lieu of notice. In Roden, the termination clause set out the employer’s obligation to provide the “minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation”: at para. 55. In Nemeth, the termination clause referred to the “notice period” as amounting to one week per year of service with a minimum of four weeks “or the notice required by the applicable labour legislation”: at para. 3.

35 In both cases, this court concluded that, the silence of the clauses as it relates to statutory entitlements beyond notice did not work so as to exclude those entitlements. As Gillese J.A. said in Roden, at para. 59, while the termination clause did not address benefit plan contributions during the notice period, it was “silent in respect of the obligation to provide benefits” and did not attempt to limit the employer’s obligation. Similarly, Roberts J.A. said in Nemeth, at para. 15: “I do not accept that the silence of the termination clause concerning the [employee’s] entitlement to severance pay denotes an intention to contract out of the ESA.”

36 The motion judge specifically considered both Roden and Nemeth and concluded that they are distinguishable from this case. As she noted, Roden is distinguishable on the basis that the applicable termination clause made “specific reference to the applicable employment standards”, yet no such reference is made in clauses 4(a) and 4(b). She concluded that Nemeth is distinguishable from this case on the basis that the termination clause only attempted to limit the amount of notice that the employee would have received on termination, but not other statutory entitlements under the ESA. The motion judge noted that “in the case at bar, unlike Nemeth, there is no referential incorporation of the ESA with respect to clauses 4a and 4b.”

37 In contrast to both Roden and Nemeth, while the first clause in this case specifically incorporates all entitlements to ESA statutory minimums in general, including benefits and severance, clauses 4(a) and 4(b) apply in the alternative and do not cover that same ground. Again, the ESA entitlements are stuck within the first clause of a disjunctive termination clause.

38 While some termination clauses explicitly and improperly bar payments that would otherwise be required under the statutory ESA scheme (for example, Hampton Securities Limited v. Dean, 2018 ONSC 101, 43 C.C.E.L. (4th) 205, at paras. 103-6, aff’d 2018 ONCA 901, 51 C.C.E.L. (4th) 244, at para. 7, leave to appeal refused, [2019] S.C.C.A. No. 34, at para. 7; Wood, at para. 3), there is no specific requirement for such language in order to find that the statutory entitlements do not apply. The overriding question is whether the termination clause purports to limit the minimum statutory obligations: Nemeth, at para. 15. The focus of the inquiry is on what the parties actually agreed to. While clauses 4(a) and 4(b) may provide an employee with more notice than the first clause, when the termination clause is read as a whole, it purports to limit ESA entitlements other than notice and benefits under clause 4(a) and notice under clause 4(b).

[13] The ESA sets out the minimum legislative framework employers must adhere to.

[14] Section 5 (1) prohibits contracting out of the ESA. It provides:

No contracting out

5 (1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void. 2000, c. 41, s. 5 (1).

[15] Sections 54 and 55 require written notice of termination or pay in lieu of notice for employees continuously employed for three months or more, unless the employee is a prescribed employee:

No termination without notice

54 No employer shall terminate the employment of an employee who has been continuously employed for three months or more unless the employer,

(a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired; or

(b) has complied with section 61. 2000, c. 41, s. 54.

[16] Rather than giving notice of termination, an employer may pay termination pay in a lump sum equal to the amount the employee would have been entitled to and continue to make whatever benefit plan contributions were required to be made (s. 61). The requirements under s. 60 are outlined further below. Section 61 reads:

Pay instead of notice

61 (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,

(a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and

(b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive. 2000, c. 41, s. 61 (1); 2001, c. 9, Sched. I, s. 1 (14).

[17] Pursuant to s. 55 of the ESA, prescribed employees, are not entitled to notice of termination or termination pay. Prescribed employees are, inter alia, those guilty of willful misconduct, disobedience or willful neglect of duty: O. Reg. 288/01, s. 2.

[18] The amount of notice required by the ESA is provided at s. 57:

Employer notice period

57 The notice of termination under section 54 shall be given,

(a) at least one week before the termination, if the employee’s period of employment is less than one year;

(b) at least two weeks before the termination, if the employee’s period of employment is one year or more and fewer than three years;

(c) at least three weeks before the termination, if the employee’s period of employment is three years or more and fewer than four years;

(d) at least four weeks before the termination, if the employee’s period of employment is four years or more and fewer than five years;

(e) at least five weeks before the termination, if the employee’s period of employment is five years or more and fewer than six years;

(f) at least six weeks before the termination, if the employee’s period of employment is six years or more and fewer than seven years;

(g) at least seven weeks before the termination, if the employee’s period of employment is seven years or more and fewer than eight years; or

(h) at least eight weeks before the termination, if the employee’s period of employment is eight years or more. 2000, c. 41, s. 57.

[19] Section 60 provides that during the notice period, the employer may not reduce the employee’s wage rate or alter any other term or condition of employment:

Requirements during notice period

60 (1) During a notice period under section 57 or 58, the employer,

(a) shall not reduce the employee’s wage rate or alter any other term or condition of employment;

(b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week; and

(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period. 2000, c. 41, s. 60 (1).

[20] In Khashaba v. Procom Consultants Group Ltd., 2018 ONSC 7617, the court was asked to determine if the following “for cause” provision in an employment contract was valid:

Termination for Cause: Procom may, at its option, terminate your employment

immediately for cause, without prior written notice or compensation of any nature. For these purposes, “cause” means any grounds at common law for which an employer is entitled to dismiss an employee summarily without notice or compensation in lieu of notice.

[21] The court in Khashaba found that the “termination for cause” provision did not comply with the ESA because it allowed for termination, without notice or termination pay, for conduct meeting the lower standard of just cause at common law, rather than the standard of “willful misconduct” required under the ESA. The court relied on the difference between willful misconduct and just cause at common law as set out in Plester v. PolyOne Canada Inc., 2011 ONSC 6068, aff’d 2013 ONCA 47.

[22] In Plester, the court considered the difference between willful misconduct and just cause at common law, concluding that willful misconduct is a higher standard. Willful misconduct involves an assessment of subjective intent, whereas just cause is a more objective standard. Willful misconduct is colloquially described as “being bad on purpose”: at para. 55. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the ESA willful misconduct standard. By contrast, common law just cause for dismissal may include prolonged incompetence, without any intentional misconduct.

[23] In Sewell v. Provincial Fruit Co. Limited, 2020 ONSC 4406, the court applied Waksdale and found the termination “for cause” provision of the plaintiff’s contract illegal because it contracted around the ESA requirement to provide notice except in cases where an employee engaged in “willful misconduct”. The termination clause in Sewell read:

Termination by the Company for Just Cause

The Company is entitled to terminate your employment at any time and without any notice or any further compensation for just cause and the Company will not have any further obligations to you whether at contract, under statute, at common law or otherwise.

Analysis

The “for cause” clause of the respondent’s termination clause breaches the ESA

[24] I find that the “for cause” clause of the respondent’s termination clause breaches the ESA. Because of this finding, the entire termination clause is invalid. As a result, the Applicant was entitled to common law notice.

[25] In this case, the termination “for cause” clause provides:

“Employment may be terminated for cause at any time, without notice.”

[26] The respondent provides two alternative arguments in support of the validity of its “for cause” clause.

[27] First, the respondent argues that the language of this clause is quite different from that in Sewell and Khashaba. They argue that an employer is entitled to pay in lieu of giving notice, and therefore that “without notice” means only that no notice need be given; it does not remove the employer’s ability to provide payment instead of giving notice, in accordance with ESA s. 61. They argue that a clause that does not expressly relieve the employer of having to provide one or the other does not contravene the ESA. The respondent relies primarily on Roden v. Toronto Humane Society, 259 D.L.R. (4th) 89, 2005 CanLII 33578 (ON CA) at paras. 55-62, 259 D.L.R. (4th) 89, and Cook v. Hatch, 2017 ONSC 47, at paras 40-41, and argues that we cannot inject or add words, that we would need to add “or pay in lieu thereof”.

[28] Alternatively, the respondent argues that properly interpreted, “for cause” in their termination “for cause” provision does not include for cause at common law, because this would create an internal inconsistency: the probation clause is applicable for any reason, yet allows ESA notice of termination or pay in lieu of notice. The respondent argues that if one interprets “for cause” as including common law cause, we need to read in words, which we should not do, and that such an interpretation would be inconsistent with the intent of the parties as manifested in the rest of the termination clause.

[29] While I agree with the respondent that the “for cause” provision in its termination clause is not similar to those in Khashaba, Sewell, and Waksdale (the termination clause in Waksdale was obtained by the respondent and is reproduced at Appendix A, found at the end of my reasons), I find that, when reading the termination clause as a whole, the respondent’s arguments are contradictory and do not give effect to the intention of the parties.

[30] The decisions relied upon by the respondent in support of its arguments that silence does not render the clause void, including Roden and Cook, are distinguishable from the circumstances of this case. That principle was stated in those decisions in the context of determining whether the employer’s termination clause contravened the ESA and was void because it failed to include the employer’s obligation to continue its contributions to the benefit plans during the notice period. The Court determined that the clauses were not rendered void, as they were simply silent about the obligation to contribute to benefit plans, rather than attempting to contract out of the ESA. This is quite different from the circumstances of the instant case, which deals with the validity of the “for cause” termination clause and with the parties’ intention, giving the words their ordinary meaning consistent with the surrounding circumstances, by “for cause” and “without notice”.

[31] In addition, I find those arguments of the respondent to be overstated. As indicated recently by the Court of Appeal in Andros, at para. 38, and earlier in Nemeth v. Hatch Ltd., 2018 ONCA 7, |418 D.L.R. (4th) 542 at para. 9:

From Andros:

From Nemeth:

9 The need for clarity does not mean that the parties must use a specific phrase or particular formula, or state literally that “the parties have agreed to limit an employee’s common law rights on termination”. It suffices that the parties’ intention to displace an employee’s common law notice rights can be readily gleaned from the language agreed to by the parties.

[32] Because of the fundamental role that employment occupies in a person’s life, employment agreements are interpreted differently from other commercial agreements. Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. Employees should know at the beginning of their employment what their entitlement will be at the end of their employment. In cases of ambiguity, where a termination clause could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee or should adopt the interpretation most favourable to the employee: Ceccol v. Ontario Gymnastics Federation (2001), 2001 CanLII 8589 (ON CA), 55 O.R. (3d) 614 (Ont. C.A.), at para. 25.

[33] Considering the ordinary meaning of “for cause” in the context of the entire agreement and the circumstances, the appropriate interpretation of “for cause” is that it applies to common law and statutory cause.

[34] This interpretation is also apparent from the start of the next paragraph: “In the event that employment is terminated for any other reason…”. “[F]or any other reason” conveys the message that this paragraph is intended to deal with termination that occurred for reasons other than “for cause”. Employment that is terminated for any other reason than for cause is more ordinarily understood to refer to employment that was terminated “without cause”. It falls outside the ordinary meaning of words to suggest that employment that was terminated for any other reason than for cause refers to employment that was terminated either “for common law cause” or “without cause”. Indeed, if one considers the ordinary meaning of words, it defies logic to think that someone can be terminated for any other reason than “for cause”, yet, in the same breath, be terminated for “common law cause”.

[35] As well, if an employer contracts out of notice, one would ordinarily understand that the employer need not pay anything in lieu of notice. One does not have to add words to understand that meaning. Moreover, this does not create an inconsistency with the probation part of the clause. The probationary period portion of the clause is all encompassing and provides that “[i]f, in the circumstances, the Employment Standards Act of Ontario requires notice of termination or pay in lieu of notice….”.

[36] Although the respondent’s arguments are made in the alternative, they are contradictory. One of the respondent’s argument is that “for cause” was intended by the parties to mean only for statutory cause. The respondent’s alternative argument is that “without notice” was intended by the parties not to prevent pay in lieu of the notice. While I appreciate that these are alternative arguments, that they contradict one another supports a finding that neither reflects the intentions of the parties. Indeed, if “for cause” were intended to apply only to statutory cause, then “without notice” would include “or pay in lieu of notice” because neither are payable for statutory cause. Depending on which argument is being advanced, the words in the agreement take on different meanings: it is not plausible that this was the intent of the parties at the time the agreement was formed.

[37] As a result, the “for cause” termination provision is illegal as it incorporates the common law “just cause” concept, which means that an employee could be terminated without any notice for conduct that is not “willful” or “bad on purpose”. This is an attempt to contract out of the minimum standards prescribed by the ESA and voids the entire clause. It does not matter what the employer might have done, the wording of the clause is determinative.

[38] This above is enough to dispose of this application. However, I will add, briefly, the following comments.

The “without cause” clause also breaches the ESA

[39] The “without cause” termination clause also breaches the ESA.

[40] The minor drafting errors alleged by the applicant, including the missing period at the end of the first sentence of the termination clause, and the error at the end of the probation clause —“of” instead of “or”— are not sufficient to render the clause void.

[41] However, the failure to mention benefits and bonuses is problematic considering the last sentence of the termination clause.

[42] The applicant’s employment contract specifically included provisions for various benefits, including vacation, employee health benefits, pension plan contributions, and bonuses.

[43] The termination provisions purport to give the employer the right to terminate the applicant’s employment at any time by providing the minimum period of notice or pay in lieu of notice specified in the ESA. This is not necessarily a problem in itself, because silence about benefits and bonuses is not determinative; a termination clause can be upheld even if the clause does not refer to the employer’s obligation to continue its contributions to the employee’s benefit plan during the notice period (see for example Roden and Cook). The overriding question, as indicated by the Court of Appeal in Andros at para. 38, “is whether the termination clause purports to limit the minimum statutory obligations”.

[44] When considering whether the termination clause purports to limit the minimum statutory obligations under the ESA, what is problematic is that: (1) the “without cause” clause specifically refers to severance pay and (2) the next sentence of the “without cause” clause provides “[w]ith respect to notice of termination or pay in lieu thereof, it is understood that the minimum period of notice or pay in lieu thereof specified in the Act will be provided and will constitute your complete entitlement to notice or pay in lieu thereof”. [emphasis added]

[45] As such, the clause in this case is less like the clause at issue in Roden and Cook and more like the clause in Wood v. Fred Deeley Imports Ltd, 2017 ONCA 158, 134 O.R. (3d) 481.

[46] For the sake of comparison, I reproduce below the termination clause at issue in Roden, Cook, Wood, and in this case, that of Ms. Lamontagne:

Roden (2005 CanLII 33578 ONCA)

Cook (2017 ONSC 47)

Wood (2017 ONCA 158)

Lamontagne (2021 ONSC 2133)

Otherwise, the Employer may terminate the Employee’s employment at any other time, without cause, upon providing the Employee with the minimum amount of advance notice or payment in lieu thereof as required by the applicable employment standards legislation: para. 55.

The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation: para. 4.

[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph, except for any amounts which may be due and remaining unpaid at the time of termination of your employment. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.: para. 19. [Emphasis added in Decision].

[47] The Court of Appeal in Wood indicated:

Deeley was precluded from contracting out of any …employment standards, unless it substituted a greater benefit for Wood and that “[c]ontracting out of even one of the employment standards and not substituting a greater benefit would render the termination clause void and thus unenforceable, in which case Wood would be entitled to reasonable notice of termination of her employment at common law: Para. 21.

[48] The Court in Wood went on to analyze the language of the employment contract, and noted:

It says nothing about benefit contributions. The clause then goes on to state that on termination, “the Company shall not be obliged to make any payments to you other than those provided for in this paragraph”, and “the payments and notice provided for in this paragraph are inclusive of your entitlement to notice, pay in lieu of notice and severance pay pursuant to the [ESA].” On its plain wording, the clause excludes Deeley’s obligation to contribute to Wood’s benefit plans during the notice period: para. 38.

[49] In Wood, the Court of Appeal said at para. 57: “[t]he “all inclusive” language in Wood’s termination clause, and its absence in Roden’s termination clause, is what distinguishes the two cases.” Sean P. Bawden, an Ottawa employment lawyer, describes such all inclusive language as a Porky Pig refrain – “that’s all, folks”. Mr. Bawden clarifies that as an employer, your contract can be silent on benefits during a notice period, but it cannot say that the employee does not get anything further beyond notice or payment in lieu thereof. This interpretation seems apparent from Wood. Again, what the employer might have done is irrelevant – the wording is what must be considered.

[50] As such, the phrase “complete entitlement” in the applicant’s contract is an attempt to contract out of the payment of benefits and bonuses during the period of notice. This distinguishes this case from Roden/Cook and makes it rather similar to Wood. The alternative reading that “complete entitlement” only refers to notice or pay in lieu thereof and that it is simply silent on the question of benefits payment is contradicted by the specific inclusion of severance pay.

[51] As the termination clause is illegal and void, the plaintiff is entitled to common law notice damages.

Damages

[52] The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position they would have been in had notice been given. In determining damages for wrongful dismissal, courts typically include all compensation and benefits the employee would have earned during the notice period. Damages for wrongful dismissal may also include an amount for a bonus the employee would have received had they continued their employment during the notice period, or damages for the lost opportunity to earn a bonus, which is generally the case where the bonus is an integral part of the employee’s compensation package, as is the case here: see Sylvester v. British Columbia, 1997 CanLII 353 (SCC), [1997] 2 S.C.R. 315, at para. 1; Paquette v. TeraGo Networks Inc, 2016 ONCA 618 , 2016 CarswellOnt 12633, at paras. 16 – 17; Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679, 437 D.L.R. (4th) 546, at paras. 41 – 62; Davidson v. Allelix Inc. (1991), 1991 CanLII 7091 (ON CA), 7 O.R. (3d) 581 (Ont. C.A.), at para. 21; Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, 449 D.L.R. (4th) 583.

[53] The appropriate period of notice is assessed by considering the circumstances of the case and the principles set out in Bardal v. Globe & Mail Ltd. (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.J.). These principles hold that an appropriate notice period is determined by considering all relevant factors, including the character of the employment, the length of service, the age of the employee, and the availability of other employment:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.:Bardal v. The Globe & Mail Ltd. (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.J.), at p. 145.

[54] The “… relevance of any factor is a function of the objectives that the law seeks to attain through notice of termination of employment. The primary objective of notice is to provide the terminated employee with a reasonable opportunity to seek alternate suitable employment… Its secondary objectives include the protection of the reliance and expectation interests of terminated employees, at least in cases where inducements have been offered by the employer, and the satisfaction of certain moral claims by an employee” Medis Health and Pharmaceutical Services Inc. v. Bramble (1999), 1999 CanLII 13124 (NB CA), 175 D.L.R. (4th) 385 (N.B.C.A.), at para. 57.

[55] The applicant argues that she is entitled to a period of 15 months for pay in lieu of notice; that in her circumstances, 12 to 15 months is the appropriate range. She relies on cases including Waters v. MTI Canada Ltd., 1996 CarswellOnt 771, Churchill v. Aero Auction Sales Inc., 2019 Carswell Ont 12982; Black v. FCA International Ltd., 1989 CarswellBC 664, and Smith v. General Recorders Ltd., 1994 CanLII 5152 (SK QB), 121 Sask R. 296.

[56] The respondent argues that Ms. Lamontagne’s common law notice cannot exceed six or seven months because in February 2020 the applicant was only 36 years old, had only 6.25 years of service, was released into a booming local economy, and had access to many comparable jobs. The respondent relies on cases including Warnes v. Army & Navy Department Store Ltd. 1996 CarswellSask 412, Colvin v. A Child’s View Learning Centre Ltd. 2003 CarswellAlta 1207, Mackin v. Jim Pattison Industries Ltd. 1982 CarswellBC 1397, and Chettleborough v. Canadian Concrete Products Ltd. 1988 CanLII 3806 (A.B. Q.B.).

[57] The decisions relied on by the applicant involve employees in slightly more senior positions, and some have distinctive facts. For example, in Churchill, 15 months was awarded in an undefended matter where the parties were also involved in a long personal relationship. The reverse is generally applicable to the respondent’s decisions. Excepting Warnes, the decisions relied on by the respondent involves employees in less senior positions, and in positions that are not comparable to that of the applicant. As well, some of the respondent’s decisions are dated and from other provinces, such that it is not apparent that they involve comparable employment, a comparable employment market, or comparable circumstances. However, the decision in Warnes involves similar positions—the employee was also a controller—but employed for a shorter amount of time. Warnes involves an older controller who, after four years of service, received six months of notice – mathematically comparable to slightly more than nine months, assuming the applicant’s 6.25 years of service.

[58] The respondent argues that the applicant’s age is a determinative factor in support of a shorter period of notice. They argue that for a longer period of notice, the employee must have been significantly older, and they give the example of Fulmer v. Nordstrong Equipment Limited, 2017 ONSC 5529, where the employee was a 59 year old controller who received ten months of notice after about 6.5 years of service. They also argue the importance of the character of the employment and state that the employee would have had to have occupied significantly more senior roles to warrant 10 to 12 months of notice for a 36 years old controller.

[59] I question the assumptions underlying the arguments made by the respondent. I appreciate that age and seniority are relevant factors to consider but was presented no evidence of their impact or significance in the circumstances of this case.

[60] In Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 , 337 D.L.R. (4th) 679 , the Court of Appeal said, at para. 26:

With regard to the appropriate weight to be given to the character of employment, I am also mindful of McRuer C.J.H.C.'s statement in Bardal at p. 145, that "[t]here can be no catalogue laid down as to what is reasonable notice in particular classes of cases." Bastarache J., writing for the majority of the Supreme Court in Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, cited this statement with approval at para. 31 and went on to caution that "[n]o one Bardal factor should be given disproportionate weight.

[61] The Court of Appeal also said in Di Tomaso, at para. 27:

Crown Metal would emphasize the importance of the character of the appellant's employment to minimize the reasonable notice to which he is entitled. I do not agree with that approach. Indeed, there is recent jurisprudence suggesting that, if anything, it is today a factor of declining relative importance: see Medis Health and Pharmaceutical Services Inc. v. Bramble (1999), 1999 CanLII 13124 (NB CA), 175 D.L.R. (4th) 385 (N.B.C.A.) and Vibert v. Paulin (2008), 2008 NBCA 23, 291 D.L.R. (4th) 302 (N.B.C.A.).

[62] The decision in Medis Health and Pharmaceutical Services Inc. v. Bramble, approvingly referred to above by the Ontario Court of Appeal, is informative in this regard. In Bramble, Drapeau J.A. conducted an in-depth analysis of what he called class prejudice, and said, while referring to the character of the employment:

The proposition that junior employees have an easier time finding suitable alternate employment is no longer, if it ever was, a matter of common knowledge. Indeed, it is an empirically challenged proposition that cannot be confirmed by resort to sources of indisputable accuracy: para. 64

[63] The parties also disagree about the effect, if any, of the COVID-19 pandemic on the reasonable period on notice. The applicant argues that on February 19, 2020, COVID-19 was becoming a serious global issue, with the first lock down measures coming only a few weeks later. The respondent states that the applicant’s employment was terminated “a month prior to the start of the first reported COVID-19 case [in Ottawa], at a time when no one foresaw the COVID-19 pandemic, or the economic disruptions that it would cause … [that] prospects for employment were promising” such that it appeared virtually certain that the applicant would rapidly secure new comparable employment. Notice is to be assessed at the time that the employment is terminated.

[64] By February 19, 2020, the possibility of a global pandemic was discussed. Cases had been reported in Asia, parts of Europe, and some had been reported in the United States. A global health emergency was brewing, and there existed at least the threat of a global pandemic, although most were not expecting what was about to happen. I take judicial notice that by February 19, 2020, there was the threat of a possible global pandemic. This threat created uncertainty about what might happen, including how our economy might fare, if a global pandemic ever became a reality. This degree of uncertainty, which existed on February 19, 2020, is one of the many factors that I consider in assessing the reasonable period of notice applicable to the circumstances of this case: Yee v. Hudson’s Bay Co, 2021 ONSC 387, at paras. 21 – 22.

[65] The applicant is a professional accountant, and a member of the Quebec Order of Chartered Professional Accountants. She is bilingual and was 36 years old when her employment was terminated. Her employment with the respondent started as assistant controller, and as expected, quickly progressed to controller. The applicant oversaw a staff of about eight people. She was responsible for the accounting operations of the respondent and she reported to a vice president. She looked after the preparation of the respondent’s financial statements, and financial analysis required by the respondent’s board in making financial decisions. She occupied a senior managerial position (as opposed to a senior executive position) and ensured that the respondent followed proper accounting procedures. Her average total compensation over the three years prior to her dismissal (2017 to 2019) could be as high as $137,730.67 (depending on the amounts attributed to the value of her benefits). The applicant’s bonus represented a significant portion of her compensation: for each of 2017, 2018, and 2019, her bonus was $27,500.00, $27,500.00 and $13,500.00 of her total compensation. After her termination, she applied for many positions.

[66] As should be apparent from the above, the assessment of reasonable notice is more of an art than a science. Having reviewed the relevant jurisprudence, the circumstances of this case, and having considered the Bardal criteria and how they apply to the circumstances of this case, in my view, the appropriate period of reasonable notice applicable for the applicant is ten months.

[67] Once terminated, the applicant had an obligation to make reasonable efforts to mitigate her loss of income. Here, the applicant made diligent efforts to seek out new employment. She applied for numerous positions and attended career transitioning services paid for by the respondent.

[68] As a result of her efforts, the applicant was able to secure employment with an Ottawa construction company and began working in her new position as an assistant controller on September 28, 2020. The applicant’s new salary is $100,000.00 annually. She was also subjected to a three-month probationary period and did not receive any benefits throughout the duration of her probationary period.

[69] The parties disagree over both the applicant’s total annual compensation, and the special damages sought by the applicant.

[70] The parties agree on the following:

• applicant’s base salary: $83,200.00;

• annual associate allowance: $3,600.00; and

• DPSP contribution at 8%: $6,656.00.

[71] They disagree over the value of the benefits, the amount of the bonus, and the availability and amount of overtime.

[72] The applicant seeks, for the value of her benefits, the equivalent of the pro-rata amount of 10% of her base income, minus amounts paid to the end of the statutory notice period, which I calculate at $5,799.65 (9/12 of $8,320, minus $440.35). However, during the hearing of the application, I allowed the respondent to file evidence about the cost of these benefits, and it amounts to $1,679.68, net of amounts already paid to the end of April 2020. I therefore find that the amount of $1,679.68 is applicable for benefits.

[73] With regards to the applicant’s bonus and overtime, I do not accept the applicant’s arguments that it should be the average of the last three years, as that argument is contradicted by the respondent’s evidence. Although I appreciate that the respondent’s evidence might not necessarily be up to date on those points (the respondent’s affidavit about this is dated July 24, 2020, and we do not have the respondent’s 2020 financial statements, nor information about what happened to overtime and bonuses prior to the end of 2020), it is nonetheless the evidence on which the parties argued this application. That evidence is essentially that, as a result of the COVID-19 pandemic, the respondent made adjustments to its employee remuneration and on March 23, 2020 instituted a policy that prevented employees from working overtime and earning overtime pay as it limited all employees to working only their regular work week of 37.5 hours. As well, the respondent’s evidence is that, as a result of the COVID-19 pandemic, it expected that its profit would be significantly reduced in 2020, and therefore expected that merit and profit bonuses would be significantly reduced as compared to previous years, if not altogether eliminated.

[74] At the time that the applicant was terminated, her accrued overtime was paid to her. As the evidence is that as of March 23, 2020, employees were not allowed to work overtime, I will assume that the applicant would have worked overtime as she ordinarily did until that time and attribute, for the applicant’s annual compensation on account of pay-in-lieu of overtime, the equivalent of one month of overtime based on her monthly average for overtime over the last three years: $1,400.00.

[75] Regarding the bonus, the applicant cites cases including Paquette in support of averaging over the last three years. However, the respondent’s evidence is that, because of the pandemic, bonuses would be significantly reduced. Consequently, I agree with and accept the respondent’s admission, and find that the applicant’s bonus would have been the same as in 2019: $13,500.00.

[76] Consequently, I find that the applicant’s total annual compensation for the notice period would have been $110,035.68 (or $9,169.64 per month), comprised of:

• $83,200 (annual base salary);

• $3,600 (annual associate allowance);

• $6,656 (DPSP contribution - 8% of base salary);

• $13,500 (bonus amount);

• $1,400 (pay-in-lieu of overtime); and

• $1,679.68 (benefits).

[77] Therefore, the applicant’s damages for common law pay-in-lieu of notice, while accounting for mitigation income ($100,000 / 12) and amounts already paid ($30,590.00), is $40,273.07, calculated as follows:

• ten months’ pay-in-lieu of notice

$91,696.40

• Less statutory amounts paid

$30,590.00

• Less mitigation income

$20,833.33 (as calculated by the applicant in her factum)

[78] In addition, Ms. Lamontagne seeks the following out-of-pocket expenses required in order to secure alternate employment:

• Laptop in the amount of $677.99; and

• Her professional dues and fees to the CPA in the total amount of $1,439.67.

[79] I agree with the respondent that 50% of the laptop amount would represent a reasonable estimate of the proportion that was required by the applicant to find employment. $338.96 is therefore allowed for the laptop. The applicant’s professional dues were payable under the terms of her contract with the respondent and are payable by her new employer. The amount sought covers the period from April 1, 2020, to March 31, 2021. As her new employment started on September 28, 2020, I will allow 50% of those amounts. Therefore, $719.84 is allowed for her professional dues and fees to the CPA.

Conclusion

[80] Judgment is granted to the applicant as per the above.

[81] If the parties are unable to agree on the costs of this application within the next ten days, then brief written submissions, not exceeding five pages and seven enclosures, shall be sent to my attention (by email to my assistant), on the following schedule: by the applicant by April 15, 2021; by the respondent by April 22, 2021; and any brief reply by April 26, 2021. I ask the parties to kindly advise me if they resolve the issue of costs, but I will nonetheless assume that the issue of costs has been resolved if I do not receive any written submissions by April 26, 2021.

Mr. Justice Pierre E. Roger

Released: March 31, 2021

Appendix A

The “Termination for Cause” clause in the decision of the Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391, reads:

Termination for Cause

It is understood that grounds for immediate termination without notice includes:

(i) solicitation of the Company’s customers or in connection with the business of the Company, whether directly or indirectly, either orally or in writing, on the internet or otherwise, including such websites as Facebook, LinkedIn and Twitter, for personal gain or profit;

(ii) use of information, such as the Company’s customer list, or in respect of the business of the Company, for personal gain or profit;

(iii) disclosing any of the Company’s confidential information to any unauthorized person, enterprise or entity, without first obtaining the written authorization from the Company. Such disclosure includes, but is not limited to, publishing the names of the Company’s customers or businesses (or their representatives) which the Company is targeting as a future customer, either orally or in writing, on the internet or otherwise, including such websites as Facebook, LinkedIn and Twitter;

(iv) commission of a criminal offence punishable by law under the Criminal Code of Canada or any other provincial or federal statute: (a) of such serious and substantial nature, as determined by the Company acting reasonably, which would materially injure and/or impede the reputation of the Company if you were retained as an employee; or (b) involving an act of dishonesty relating to the Company such as embezzlement, theft or fraud;

(v) failure to immediately inform management of receipt of gifts or favours valued at greater than $100.00 annually;

(vi) violation of any applicable human rights legislation or non-discrimination policy that the Company may establish at any time in the future;

(vii) any action or conduct that would constitute harassment or violence at the workplace;

(viii) engaging in any activity which likely competes with the Company, compromises the position of the Company, or causes a conflict of interest by preventing you from fully and objectively performing your duties and obligation in a particular situation, or a perceived conflict of interest;

(ix) communicating, electronically or otherwise, in a manner that is: discriminatory or harassing; derogatory or demeaning to any individual or group; obscene, sexually explicit or pornographic; defamatory or threatening; in violation of any license governing the use of software or other intellectual property; or, in any manner that is illegal or contrary to the Company’s policy or business interest;

(x) making any comments, directly or indirectly, either orally or in writing, on the internet or otherwise, including such websites as Facebook, LinkedIn and Twitter, of a negative, disparaging, defamatory or slanderous nature about the Company, its employees, officers, directors or associated companies, or your relationship with the Company;

(xi) fundamental breach of your duties as set out in this agreement or in any schedules to this agreement;

(xii) material inaccuracies on your resume, job application, or information provided by you in the interview process with the Company;

(xiii) documented warnings with respect to the performance of your duties that the Company considers to be unsatisfactory; and,

(xiv) any matter recognized by the Courts to justify termination for cause.

If the Company terminates your employment pursuant to this Section, you shall be entitled to receive your then current unpaid base salary set out above accrued to the date of termination and the Company shall not be required to pay any anticipated remuneration, and all benefits shall be discontinued as of the date of termination.

In the event that a court of competent jurisdiction determined that the Company was not justified in terminating your employment for cause, then you agree that your notice entitlement is limited to only as described above under the heading “Termination of Employment with Notice”.

COURT FILE NO.: CV-20-83037

DATE: 20210331

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANNICK LAMONTAGNE

Applicant

– and –

J. L. RICHARDS & ASSOCIATES LIMITED

Respondent

REASONS FOR decision

Roger J.

Released: March 31, 2021

Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 2133

Case Summary

Background Facts

Issue

General Principles

Pay instead of notice

Employer notice period

Requirements during notice period

Analysis

Damages

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 2

Legislation 4