COURT FILE NO.: CV-20-652407

DATE: 2021-10-14

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Steve Livshin, Plaintiff

AND:

The Clinic Network Canada Inc., Defendant

BEFORE: W.D. Black J.

COUNSEL: Paul J. Martin and Frank B. Portman, for the Plaintiff

Pamela Chan Ebejer and Claire Brown, for the Defendant

HEARD: September 14, 2021

ENDORSEMENT

[1] This is a motion for summary judgment in the context of a claim by the plaintiff (the “plaintiff” or “Livshin”) relative to the defendant’s termination of his employment with the defendant (the “defendant” or “TCN”).

Overview

[2] The relevant facts are not in dispute. The determination of this matter depends on the interpretation of the employment agreement between the parties (the “Employment Agreement”), and as such the parties (and I) agree that this is an appropriate matter for summary judgment.

[3] The case raises an interesting wrinkle relative to a recent line of authorities standing for the proposition that an employment agreement (and specifically termination provisions) cannot violate the Employment Standards Act, 2000 (the “ESA”). Typically, though not exclusively, these cases deal with a termination provision that is inconsistent with the limited circumstances in which the ESA does not require an employer to make termination and severance payments nor benefit payments. In this case, as in many of the recent authorities, the specific allegation is that the threshold of “just cause” provided for in the Employment Agreement as the precondition to a dismissal without notice is a common law concept broader in scope than the more limited conduct contemplated by the ESA (specifically in O. Reg 288/01, s.2(1), para. 3 thereunder).

[4] The wrinkle here relates to the fact that the Employment Agreement was negotiated as a part of, and in the context of, a commercial transaction by which two businesses in which Livshin had an interest were being sold to the TCN, and in which the parties, who were sophisticated business people, were represented by counsel in relation not only to the overall share purchase transactions, but also in relation to the Employment Agreement.

[5] Briefly put, the defendant suggests that even if the termination clause at issue violates the ESA, which it denies, the premise underlying the line of authorities in question, namely that there is typically an imbalance of power between employers and employees such that employment agreements must be interpreted with that power imbalance in mind, does not arise in this case so that there is no need for the court to “protect” the plaintiff here.

[6] There is also a disagreement about the payment to which the plaintiff is entitled having regard to the termination of his employment under a fixed term agreement, and, relative to this assessment of damages, the appropriate start and end dates under the fixed term agreement at issue.

Relevant Facts

[7] The essential facts, which, again, are not in dispute, are as follows.

A. Livshin’s Background and Business Interests

[8] Livshin has a medical degree and has worked for many years in the health care industry.

[9] In 2016, he founded a medical practice, specializing in the treatment of rheumatology, called “Involved Medicine”. The business of Involved Medicine was owned and managed through a numbered company, 9937340 Canada Inc. (“993”).

B. TCN Purchase of Livshin Businesses

[10] In 2018, there was a discussion between Livshin and Kim Wei (“Wei”), a representative of TCN. TCN owns and operates a number of pain and cannabis clinics and related facilities across Canada. TCN, through Wei, expressed an interest in acquiring the business of Involved Medicine through a purchase of 993’s shares.

[11] Negotiations ensued and came to also include the acquisition by TCN of Silver Medical Group – Centre for Pain Care, another medical clinic in which Livshin had an interest.

C. Negotiations for Livshin to Join TCN as Employee

[12] As part of the overall transaction (the “Share Purchase”), it was proposed that Livshin (together with another gentleman who was Livshin’s partner in the businesses that were the subject of the transaction) would stay on with TCN as an employee.

[13] For purposes of these negotiations, including the purchase of 993’s shares and the Employment Agreement, the parties were represented by counsel.

[14] As regards the Employment Agreement, TCN proposed a three-year term. Both this term, and various specific provisions of the Employment Agreement, were the subject of back and forth negotiations, including with respect to the payment(s) to which Livshin would be entitled in the event of termination of the Employment Agreement.

[15] It is evident (a fact on which the defendant places considerable emphasis, as discussed below) that Livshin sought a provision whereby, if he was terminated before the conclusion of the term of the agreement (which was ultimately agreed to be three years in keeping with TCN’s stance in the negotiation) he would be entitled to payment for any remaining portion of the three-year term outstanding at the time of termination. TCN would not agree to this request, and the signed version of the Employment Agreement did not contemplate that Livshin would be paid for the balance of the term outstanding upon termination.

[16] The terms of the Share Purchase were negotiated in early Fall 2018, and the framework for the Share Purchase was agreed and in place by September 2018.

[17] The parties also executed the Employment Agreement, which was dated September 30, 2018 and which, by its terms, would “take effect” upon completion of the Share Purchase. The Employment Agreement recited that the Share Purchase was also intended to close on September 30, 2018.

D. Delay of Closing of Share Purchase

[18] Owing to an ongoing negotiation with Silver Medical Group’s landlord, the completion of the Share Purchase was delayed, and did not ultimately close until March 2019. In the meantime, Livshin assumed the role of Vice President, Involved Medicine and had responsibility for other pain clinics in Ontario. In this role, Livshin reported to TCN’s President and Chief Operating Officer, and was paid a base salary of $120,000, as well as an amount of $60,000 related to his management of the Silver Medical Group, a travel allowance, and various associated benefits.

[19] So, while the Employment Agreement contemplated that it would not take effect until the closing of the Share Purchase (which at the time of executions of the Employment Agreement was to take place simultaneously) as a practical matter Livshin assumed and commenced his role with TCN at the time the Employment Agreement was executed.

[20] Plaintiff’s counsel characterizes Livshin’s work during this period between the execution of the Employment Agreement and the closing of the Share Purchase as being under “a casual, unwritten temporary contract of employment” and takes the position that Livshin only began working under the Employment Agreement after the close of the Share Purchase on March 24, 2019. At that time, Livshin was paid the signing bonus contemplated by the Employment Agreement (in the nominal amount of $100) and was paid outstanding amounts for what he characterizes as “pre-employment Contract work”.

[21] From the date of the closing of the Share Purchase, Livshin worked for TCN for almost exactly a year. During that year, Livshin was paid his salary, travel allowance, and benefits.

E. Layoff and Subsequent Termination of Livshin’s Employment

[22] On March 27, 2020, owing to a substantial pandemic-driven decline in TCN’s business, Livshin received a letter from TCN advising that he was being temporarily laid-off from his employment with TCN (something which the Employment Agreement did not provide for). Livshin was told that the lay-off was temporary, and that his group employee benefits would continue during this temporary lay-off. He was provided with a Record of Employment so that he could apply for Employment Insurance benefits as well. Subsequently, with the passage of Ontario’s Infectious Disease Emergency Leave (by way of O. Reg. 288/20 under the ESA) Livshin’s temporary lay-off was converted to a deemed Infectious Disease Emergency Leave with retroactive effect to March 27, 2020, the first day of the temporary lay-off.

[23] On August 31, 2020, Livshin received a further letter, advising that his employment with TCN was being terminated, effective immediately. Between the lay-off letter of March 27, 2020 and the termination letter of August 31, 2020, Livshin did no further work for TCN and was paid no further amounts by way of salary or otherwise.

[24] In connection with the termination, TCN presented a letter to Livshin advising of TCN’s position that the Employment Agreement entitled Livshin to 24 weeks of termination pay in lieu of notice if he executed a full and final release in favour of TCN. Livshin declined to sign a release, and accordingly, based on its interpretation of the Employment Agreement, TCN paid Livshin 2 weeks of termination pay.

Relevant Provisions of Employment Agreement

[25] The provisions of the Employment Agreement most relevant for a determination of the matters at issue are:

1. Tenure

This Agreement shall take effect upon completion of the Definitive Agreement. This Agreement will have a term of three (3) years (the “Term”), unless renewed by the parties before expiry of such initial term, or unless terminated earlier in accordance with Section 6 of this Agreement. Upon the effective date of this Agreement, Steve shall be provided with a signing bonus of $100.00, as consideration for the terms and conditions of this Agreement.

6. End of Employment

a) Termination of Employment at end of Term: Unless renewed earlier in writing by the Company or terminated earlier in accordance with the provisions of this Section 6, your employment shall automatically terminate at the conclusion of the Term of this Agreement, without any further notice or payment of salary or benefit plan contributions in lieu of notice, or any other form of compensation.

c) Termination by the Company for Just Cause – The Company has the right, at any time and without notice, to terminate your employment under this Agreement for just cause.

d) Termination by Company Without Just Cause – The Company may terminate your employment without just cause upon provision to you of the following payments or working notice in lieu of payment, or combination of the two at the Company’s discretion (and no more): (i) an amount as identified in Schedule “C” as pay in lieu thereof, or a combination of the two, inclusive of the minimum notice or pay in lieu thereof to which you are entitled under the Employment Standards Act, 2000 (Ontario), and severance pay (if applicable) to which you are entitled under the Employment Standards Act, 2000 (Ontario), or any successor legislation, and no more, (ii) continue to make the benefit plan contributions necessary to maintain your participation for the minimum period prescribed under the Employment Standards Act, 2000 (Ontario), or any successor legislation, and no more, provided to you by the Company, if any, immediately prior to the termination of your employment, and (iii) any portion of the Annual Salary and accrued vacation pay, if any, that has been earned by you prior to the date of termination but not yet paid. You will not be paid for unused time off, including vacation entitlement, except as may be required by the Employment Standards Act, 2000 (Ontario), or any successor legislation, and no more. You agree that the Company may deduct from any payment of salary instead of notice under this provision the benefit plan contributions, if any, that were regularly made by you during the term of this Agreement in accordance with the terms of all benefit plans to be maintained under this provision for the minimum period prescribed by law. You agree that upon receipt of your entitlements in accordance with this section, no further amounts will be due and payable to you whether under contract, statute, common law, or any other law.

e) Fair and Reasonable; Full and Final Release – You confirm that the notice and/or pay in lieu of notice provisions contained in this Section 6 are fair and reasonable and you agree that upon any termination of your employment under this Agreement by the Company in compliance with Section or upon any termination of your employment under this Agreement by you, you will have no action, cause of action, claim or demand against the Company, its affiliates or any other person as a consequence of such termination. In exchange for any amounts in excess of the statutory minimum you will be required to execute a full and final release in a form provided by the Company. If you do no execute and return a release you will only be eligible for and provided with any amounts that you are entitled to pursuant to the minimums found in the Employment Standards Act, 2000 (Ontario).

Issue re “Just Cause” Termination Provision

[26] The plaintiff argues, in reliance on various recent cases, that s. 6(c) is contrary to the ESA, and as such invalidates the other components of the termination clause.

[27] Casting aside the defendant’s argument about the context in which the Employment Agreement was negotiated for the moment, the plaintiff’s argument is persuasive.

[28] As set out above, s. 6(c) gives TCN the right, “at any time and without notice”, to terminate Livshin’s employment “for just cause”.

[29] “Just cause” is not defined in the Employment Agreement but, typically, as held in various cases, the phrase is understood as a common law notion connoting a basis, from an employee’s performance or conduct, justifying termination of the employee’s employment without the need for advance notice. Nothing in the Employment Agreement suggests any other interpretation of “just cause” here.

[30] Again, as set out in various cases, “just cause” can be contrasted with the requirements of the ESA. Pursuant to O. Reg. 288/01, s. 2(1), para. 3, an employer can only withhold termination pay, severance pay and the continuation of relevant benefits in response to workplace conduct that amounts to “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

[31] That these are different standards, and that the ESA provision is narrower than “just cause” under common law can be illustrated by the example of incompetence. Under some circumstances, incompetence might provide a basis for “just cause” under common law. Under the ESA standard, however, it cannot. This is but one example of behaviour or performance which can constitute “just cause” under common law but does not meet the more stringent standard under the ESA.

[32] There is no attempt in the Employment Agreement to differentiate between the relevant standards, or to specify circumstances which may trigger “just cause” at common law but do not trigger the ESA threshold.

[33] As such, the plaintiff argues, and indeed recent law supports, the position that s. 6(c), by virtue of its breadth, risks depriving an employee (here, Livshin) of entitlements to pay and benefits under the ESA.

[34] The plaintiff relies on the seminal case of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at para. 69, and authorities that have followed it, for the proposition that, since the Employment Agreement purports to provide the employer with the ability to dismiss the plaintiff in a manner that would breach the ESA in some circumstances, it is unenforceable.

[35] In addition, pointing to another pivotal recent authority, Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, the plaintiff’s position is that when, as it argues is the case here, a “just cause” provision contravenes the ESA, it renders all other provisions in the Employment Agreement unenforceable. Relying on Waksdale, the plaintiff argues that the contravention of the ESA in the “just cause” provision also invalidates the “without cause” provisions of the Employment Agreement. The plaintiff submits that this is the case whether or not the “without cause” provision is itself, when read in isolation, compliant with the ESA, and even when, as here, the employer does not invoke the offending “just cause” provision in dismissing an employee.

[36] On this issue, the defendant notes that the plaintiff does not challenge the enforceability of the “without cause” provision of the Employment Agreement (in s. 6(d)). It maintains that because s. 6(c) states only that the plaintiff will not receive “notice” in the event that his employment is terminated for just cause, it does not purport to withhold “termination pay”. Therefore, it argues that the “just cause” provision does not eliminate the plaintiff’s entitlement to termination pay in lieu of notice or severance pay in the event that his employment is terminated “for just cause and the cause for which he is terminated is not wilful misconduct.” (defendant’s factum, at para. 43).

Conclusion on “Just Cause” Provision

[37] Despite the able submissions of Ms. Chan Ebejer, I do not accept this argument. While it may have some surficial technical merit, it is important to recall the fundamental basis from which the Fred Deely and Waksdale lines of authority emanate.

[38] Both of these cases start from the premise that inherent in the employer-employee relationship is an imbalance of power, that in those circumstances an employee may not appreciate the distinction between common law cause on the one hand and O. Reg. 288/01 under the ESA on the other, and that therefore provisions like s. 6(c) risk an employee missing out on pay and benefits to which he or she is statutorily entitled. Consistent with this concern, the bottom line from these cases is that employment agreement provisions should clearly comply with the ESA, and that if they do not, they are invalidated.

[39] In my view the defendant’s technical argument concerning the interpretation of the word “notice” in s. 6(c) does not overcome the underlying concern that provisions should clearly comply with the ESA, and should not risk creating misunderstanding nor any associated under‑compensation of employees. It is always open to an employer to include clear and specific language complying with the ESA and articulating, again in clear and specific language, the limited and exceptional conduct which, under the ESA, can lead to denial of any compensation on termination.

[40] The defendant also relies on what it argues is a “failsafe” provision, in s. 8 of the Employment Agreement. I will come back to that argument below.

Impact of Sophisticated Parties Represented by Counsel in Context of Related Transactions

[41] In my view, the defendant’s most powerful argument, and frankly the one on which the defendant’s factum and oral submissions focused, is about the impact, on the analysis set out above, of the fact that in this case two sophisticated parties, represented by counsel, negotiated the agreement in issue in the context of and alongside the Share Purchase.

[42] The defendant argues that the premise about imbalance of power, from which the Fred Deeley and Waksdale authorities proceed, is simply not present in this case.

[43] TCN relies in that regard on the Supreme Court of Canada’s decision in Payette v. Guay inc., 2013 SCC 45, [2013] 3 S.C.R. 95. In that case, dealing with the enforcement of restrictive covenants, the Court, at paras. 36-37, said:

The application of different rules in the context of a contract of employment is a response to the imbalance of power that generally characterizes the employer‑employee relationship when an individual contract of employment is negotiated, and its purpose is to protect the employee.

These rules have no equivalent in the commercial context, since an imbalance of power is not presumed to exist in a vendor-purchaser relationship.…

At para. 39, the Court continued:

Thus, the common law rules for restrictive covenants relating to employment do not apply with the same rigor or intensity where the obligations are assumed in the context of a commercial contract. This is especially true where the evidence shows that the parties negotiated on equal terms and were advised by competent professionals, and that the contract does not create an imbalance between them.

[44] The defendant argues that the same holds true here. That is, given that the Employment Agreement was negotiated in the context of a commercial transaction with lawyers representing both (sophisticated) parties, the concerns motivating the Fred Deeley and Waksdale lines of authority are not present, and there is no need for the court to lean in favour of the employee’s position or to insist on strict and clear compliance with the ESA (in the event I find the language of s. 6(c) problematic).

[45] While, again, Ms. Chan Ebejer argued the position forcefully, I am not persuaded that the considerations laid out in Payette apply directly to the facts before me.

[46] Payette involved Guay inc., a commercial enterprise, acquiring assets belonging to corporations controlled by Payette. The agreement governing the sale of assets contained non‑competition and non-solicitation clauses. To ensure a smooth transition in operations following the sale, the agreement provided that Payette would work for Guay inc. as a consultant for six months following the closing. It also reserved the option of the parties agreeing on a contract of employment under which Payette would continue to work for Guay inc. At the end of the transitional period, the parties agreed on a contract of employment, originally for a fixed term and subsequently for an indeterminate term. A few years later Guay inc. dismissed Payette (not alleging cause) and Payette started working with a competitor of Guay inc. Guay inc. sought an injunction to enforce the restrictive covenants in the original agreement for the sale of assets. The Superior Court of Quebec dismissed the motion, and the Quebec Court of Appeal set aside the Superior Court judgment and ordered a permanent injunction requiring Payette (and his new employer) to comply with the restrictive covenants.

[47] The Supreme Court of Canada, in dismissing Payette’s appeal, held that the rules applicable to restrictive covenants relating to employment differ depending on whether the covenants are linked to a contract for the sale of a business or to a contract of employment.

[48] Noting the imbalance of power generally characterizing an employer-employee relationship, and the resultant paramountcy of protecting the employee, the Court said that this approach is not replicated in the commercial context, since such an imbalance of power is not presumed to exist in a vendor-purchaser relationship.

[49] The Court referenced employee protection provisions under Article 2095 of the Civil Code of Quebec, which apply only to contracts of employment and stipulate that employers who resiliate a contract of employment without a serious reason may not avail themselves of a non‑competition restriction.

[50] The task, according to the Supreme Court, was to determine whether a restrictive covenant is linked to a contract for the sale of assets or to a contract of employment, and to determine why and for what purpose the accessory obligations of non-competition and non-solicitation were assumed.

[51] The Court held that in the case before it the clauses at issue were creatures of, and could not be dissociated from, the contract for the sale of assets. In that context, given the highly specialized nature of the industry (crane rental), the provisions at issue were found to be reasonable and enforceable.

Conclusion on Significance of Sophistication and Context

[52] In the case before me, the “just cause” provision is difficult to link to anything other than the Employment Agreement itself. There is no evidence to suggest that there were specific commercial imperatives arising in the transaction specifically or the industry more generally that required TCN to be able to dismiss Livshin for just cause without notice and without regard to the provisions of the ESA.

[53] As such, and notwithstanding the relative sophistication of the plaintiff and his representation by counsel in the Share Purchase, in my view there is no compelling reason why TCN should be permitted to rely on termination provisions that do not comply with the ESA.

[54] In Fred Deeley, at para. 28, Justice Laskin, noting the presumed power imbalance, cited some general principles to be applied in this setting, including:

• 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” (citing Machtinger v. HOJ Industies Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 1003);
• 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 (citing Machtinger, at p. 1004);
• 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 (citing Machtinger, at p. 998);
• 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 (citing Ceccol v. Ontario Gymnastics Federation (2001), 2001 CanLII 8589 (ON CA), 149 O.A.C. 315 (C.A.); Family Counselling Centre of Sault Ste. Marie and District (2001), 2001 CanLII 4698 (ON CA), 151 O.A.C. 35 (C.A.)).

[55] While, as noted, I appreciate that these principles start from a presumed power imbalance, they strike me as providing guidance which, generally speaking, is not onerous for employers to follow.

[56] Looking to Payette, if there is some commercial imperative driving the need for a particular provision, linked to, and necessitated by, a commercial transaction out of which the employment relationship arises, and if the reason for that provision is primarily related to the commercial transaction, then it may be that there is more latitude for a provision that is on its face at odds with protective legislation. However, I expect that this will rarely be the case and, indeed, am hard‑pressed to come up with examples which would permit a breach of the ESA.

[57] In any event, there are no such imperatives here. While Livshin may be more sophisticated than many employees, and notwithstanding that he was represented by counsel, I can see no reason why the clause at issue had to be drafted in a way that on its face contravenes the ESA. Further, in my view the goal that employers be encouraged to draft clauses that comply with the ESA trumps the suggestion that Livshin may have been better able than many or most employees to recognize the potential peril.

[58] Again, there is no suggestion by TCN that s. 6(c) had to be drafted in the way it was to protect or preserve some aspect of the related Share Purchase, and no other imperative offered to explain the drafting decision. TCN’s argument that Livshin’s representation by counsel should result in him being taken to understand the potential pitfalls of the Employment Agreement at issue here might be turned back on TCN to suggest that an employer, represented by counsel, particularly in the period after the Court of Appeal’s decision in Fred Deeley, ought to know better than to draft a termination provision that fails to comply with the ESA.

Alleged “failsafe” Provision

[59] The final argument made by TCN with respect to the offending clause is that s. 8(c) operates as a “failsafe” ensuring that Livshin could not be misled. That provision is drafted as follows:

c) Severability of terms – In the event that any term of this Agreement is found to be unenforceable for any reason, that finding will not affect any other term of this Agreement. If any term of this Agreement is so broad as to be unenforceable, that term will be interpreted to be only as broad as is enforceable.

[60] The leading Ontario case on “failsafe” or “saving” provisions is the Court of Appeal’s decision in Amberber v. IBM Canada Ltd., 2018 ONCA 571, 424 D.L.R. (4th) 169.

[61] In Amberber, the “failsafe” provision at issue was highlighted by the court at para. 13. It read as follows:

In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment.

[62] It is important to note that the Court of Appeal, in holding that the motion judge was correct in reading this provision “up” to interpret it as ensuring that any portion of the termination clause that fell short of the ESA could be read to comply with the ESA, placed some reliance on the fact that the “failsafe” provision was not a severability clause that sought to delete or sever any part of the termination provision.

[63] This becomes important because while TCN refers to s. 8(c) as a “failsafe” provision, the provision is accompanied by language, in bold type, that reads “Severability of terms”. With that interpretive guidance, the operative provision of the clause, which says, “[i]f any term of this Agreement is so broad as to be unenforceable, that term will be interpreted to be only as broad as is enforceable” can be properly understood as a severability clause (and indeed it reads like one).

[64] In North v. Metaswitch, 2017 ONCA 790, 417 D.L.R. (4th) 429, the Court of Appeal considered the potential role of a severability clause in this setting. Justice Feldman, at para. 41, wrote that the preferred approach:

[I]s to first assess the termination clause to see if 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. In that way, the severability clause is not void, but it is inoperative where the agreement contracts out of or waives an employment standard.

[65] Justice Feldman went on to explain that this approach would not do any injustice to the contractual interpretation principle of ascertaining the intention of the parties. “Because the termination clause is void”, she wrote, “it cannot be used as evidence of the parties’ intentions to comply with the ESA”: Metaswitch, at para. 42.

[66] Moreover, according to Justice Feldman, “this approach also causes no disadvantage to employers, who, as noted by Iacobucci J. [in Machtinger], are free to make a legal contract that limits an employee’s rights on termination to the standards set by the ESA.”: Metaswitch, at para. 43.

[67] For these reasons, I find that s. 8(c) does not operate as a failsafe clause like the one at issue in Amberber. Instead, I find that it is a severability clause.

[68] Ultimately, I come to the same landing as Justice Feldman’s conclusion above in Metaswitch. That is, the employer here was free to make a legal contract that limited the plaintiff’s rights on termination to the standards set by the ESA. The employer failed to do so, and there was no commercial imperative arising from the Share Purchase that would justify such failure. To me, the encouragement of employers to comply with the ESA is the overriding goal, and if compliance is achieved it is not necessary to undertake subjective assessments of sophistication. Accordingly, I find that the termination provisions in the Employment Agreement are void.

Payment for Fixed Term

[69] Livshin argues that, absent an enforceable termination clause, he is entitled to be paid for the balance of the term in his fixed term employment agreement. Section 1 of the Employment Agreement, entitled “Tenure”, provides for a three-year term:

This agreement shall take effect upon completion of the Definitive Agreement. This Agreement will have a term of three (3) years (the “Term”) unless renewed by the parties before expiry of such initial term, or unless terminated earlier in accordance with Section 6 of this Agreement.

[70] Livshin acknowledges that he pushed back against this clause during the negotiation of the employment agreement, but ultimately acquiesced to it. He says, however, that the clause is unambiguous, and, assuming s. 6 is unenforceable (as I have found), the Employment Agreement runs until its expiry three years after it commences.

[71] Livshin relies on the Court of Appeal’s decision in Howard v. Benson Group (The Benson Group Inc.), 2016 ONCA 256, 129 O.R. (3d) 677, at para. 21, for the proposition that a clear fixed term in an employment agreement ousts the presumption of reasonable notice and prima facie entitles an employee to payment of the balance of the term of the contract in the event of early termination:

Where an employment agreement states unambiguously that the employment is for a fixed term, the employment relationship automatically terminates at the end of the term without any obligation on the employer to provide notice or payment in lieu of notice. Such a provision, if stated unambiguously, will oust the implied term that reasonable notice must be given for termination without cause.

[72] In Benson Group, the employee was hired on a fixed term contract. The provisions of the contract permitting the termination of the contract were found to not limit his entitlements on termination. Notwithstanding this, the trial judge awarded common law notice rather than payment for the balance of the contract. The Court of Appeal overturned that decision and awarded the employee the balance of the contract, some 37 months of pay. At para. 44 the court stated:

In the absence of an enforceable contractual provision stipulating a fixed term of notice, or any other provision to the contrary, a fixed term employment contract obligates an employer to pay an employee to the end of the term, and that obligation will not be subject to mitigation.

[73] Relying on this authority, and subject to a determination about start and end dates for the Employment Agreement, the plaintiff’s position is that he is entitled to payment to the end of the term, and has no duty to mitigate his damages.

[74] As noted above, the defendant maintains that the termination clause in the Employment Agreement does not violate the ESA. To the extent that I find otherwise (which I have), the defendant does not dispute the validity of the proposition cited from Benson Group. Instead, the defendant disagrees with the plaintiff about the start and end dates of the plaintiff’s employment.

Start and End Dates

[75] Accordingly, I find that he plaintiff is entitled to be paid for the balance of the term of the Employment Agreement, and now turn to address the parties’ arguments about what the remaining term is, based on their respective positions as to the effective start and end dates.

[76] In terms of the start date, the plaintiff argues that, although he worked for TCN starting at the beginning of December of 2018, which was the time at which the Share Purchase was originally intended to close and which closing date in turn triggered the commencement date for the Employment Agreement, his work between December 2018 and March 2019 was, as set out above, on the basis of a “casual unwritten temporary contract of employment”.

[77] Pointing to the actual closing date of the Share Purchase as the contractually stipulated start date for the Employment Agreement, Livshin maintains that his employment did not actually start until March 2019.

[78] On this point I think it is the plaintiff who is being unduly technical.

[79] The intention of the parties was that the Share Purchase was to close at the beginning of December 2018 and that the plaintiff would commence employment at that time. While, owing to an unforeseen obstacle with the landlord of one of the entities being acquired, the closing did not finally occur until March 2019, the plaintiff nonetheless started work with TCN at the beginning of December 2018, and demonstrably did so on the basis that the Employment Agreement contemplated.

[80] That is, Livshin assumed the role contemplated under the Employment Agreement at the beginning of December 2018, was paid the amounts specified under the Employment Agreement (albeit these amounts were in whole or in part paid retroactively) and received the benefits including travel allowance specified by the Employment Agreement. In short, the plaintiff’s employment with TCN actually, in fact, commenced in December 2018, and both parties acted in keeping with that assumption. Indeed, consistent with this characterization, a resume that Livshin prepared after his departure from TCN stated that he had started employment with TCN in December 2018.

[81] In terms of the end date, Livshin argues that the period between his initial lay-off on March 27, 2020 and the date of the final termination letter, August 31, 2020, should not be counted against the balance of the term. He notes that he was paid no salary after March 27, 2020 (albeit his benefits continued). He also argues that the Employment Agreement contained no provision contemplating a temporary lay-off, or a suspension of salary, such that it would be inequitable for TCN to be credited for a period during which it was in breach of the Employment Agreement.

[82] Given the unenforceability of the termination provisions of the Employment Agreement, Livshin maintains that there is no basis under the Employment Agreement for the employer to abridge the term for any reason.

[83] Finally in this part of the argument, Livshin notes that pursuant to s. 4(1) of the Infectious Disease Emergency Leave, O. Reg. 228/20, his lay-off was converted into a protected infectious disease emergency leave under the ESA, and that he should thus be protected from being penalized for taking that leave (and he argues that allowing TCN to invoke the leave to reduce the relevant term of the Employment Agreement would amount to a penalty).

[84] For its part, TCN argues that by operation of the emergency regulation the temporary layoff was deemed by operation of law to have been converted into a statutory leave of absence under the ESA, and that a statutory leave of absence is counted, under ss. 52(1) and 59(1) of the ESA as part of an employee’s period of employment. As such, TCN argues, there is no basis to exclude this statutory leave from service that is counted for the purposes of the termination of a fixed-term employment contract. Given that the continued accrual of service is statutorily prescribed, TCN says that such continued accrual of service cannot be construed as a “penalty.”

[85] On balance, given that TCN stopped paying Livshin’s salary as of March 27, 2020, and given that otherwise the enforced Infectious Disease Emergency Leave would count against Mr. Livshin’s entitlement somewhat arbitrarily (particularly inasmuch as I perceive TCN’s position to be that had the lay-off not been converted to an emergency leave, the time from the lay‑off to the final termination would have been excluded from the determination of the end date; TCN says, in para. 69 of its factum: “the Plaintiff was not on temporary layoff, but instead was deemed to be on a statutory leave of absence permitted under the ESA….time spent on a statutory leave of absence is counted as part of an employee’s period of employment”), I find that for the purpose of calculating the remaining term under the Employment Agreement, the period of employment should run from December 1, 2018 until March 27, 2020.

[86] Ultimately, this results in a period of roughly 16 months, leaving roughly 20 months as the remaining term for which the plaintiff is to be paid. I expect that the parties can use the exact dates to calculate the precise payment. Following the authority of Benson Group, I find that, in a fixed term agreement like the one in this case, where the calculation of damages is based on the remaining term of the agreement, there is no duty for the plaintiff to mitigate his damages. The authorities on which the defendant relies on this issue are dated, and in my view Benson Group is good authority on this point.

Travel Allowance

[87] That leaves only the issue of the plaintiff’s entitlement (or otherwise) to the contractual travel allowance of $18,000 per year.

[88] The Employment Agreement provides:

There will be a travel allowance of eighteen thousand ($18,000) dollars, that will cover all business-related expenses for all travel in Ontario, including any highway toll fees and cellular phone. Any reimbursable additional travel expenses will be subject to written pre-approval of senior management of TCN.

[89] Justice Davies dealt with a similar issue recently in Sanghvi v. Norvic Shipping North America, 2021 ONSC 1211. At para. 4, Her Honour held in relation to an employee’s claim for monthly compensation for “cell phone, residential phone and internet costs ‘related to business activities’” that “[b]ecause Mr. Sanghvi did not work for Norvic during the notice period, he would not have incurred phone and internet expenses ‘related to business activities’ during that time for which he should now be reimbursed. In my view, compensation for these expenses should not be included in the damages calculation.”

[90] I agree with that approach. In this case, it similarly means that Livshin is not entitled to reimbursement for travel expenses for the outstanding term of the Employment Agreement given that he was not actually incurring travel or other business-related expenses in connection with his employment with TCN during that time.

Benefits

[91] On the other hand, I agree that Livshin should receive a payment equivalent to 10% of his salary for the remainder of the Employment Agreement (as I have determined that remainder above) in regard to his group benefits plan: see McGuinty v. 1845035 Ontario Inc. (McGuinty Funeral Home), 2020 ONCA 816, at para. 54.

[92] To be clear, all calculations should be based on Livshin’s combined base salary of $180,000 per year.

Costs

[93] I agree that the amount of $8,000 that Livshin received in Canada Emergency Response Benefits (CERB) should be deducted from the overall award.

[94] The plaintiff is entitled to his costs of the motion and action. If the parties cannot agree on the appropriate amount for costs, the plaintiff can submit written submissions not to exceed 5 pages in length, together with a bill of costs, within 20 days of today’s date (Wednesday, November 3, 2021). The defendant shall then have 10 days in which to respond (Monday, November 15, 2021), and is also not to exceed 5 pages in its responding submissions which may be delivered to my assistant at: lorie.waltenbury@ontario.ca.

W.D. Black J.

Date: October 14, 2021