Labour, Employment and Human Rights Bulletin

Since the days of the Supreme Court's decision in Machtinger v HOJ Industries Ltd, it has been well established that employers in common law provinces can contractually limit the amount of common law notice or pay in lieu to which an employee might be entitled upon termination. The case law on drafting such clauses, however, is ever evolving and courts are evidently wary of enforcing these provisions, except in the clearest of cases.

Recently in Holm v AGAT Laboratories Ltd, the majority of the Alberta Court of Appeal found that a clause purporting to limit an employee's common law notice by simply stating that termination pay would be calculated in "accordance with the provincial legislation for the province of employment" was not specific enough to contract out of the common law "reasonable notice". Even though the employment agreement stated that such amounts would be all that the employee was entitled to, the majority of the court found that this wording did not clearly restrict the applicable notice period to the statutory minimum set out in the Code. The court felt that the reference to the applicable employment standards legislation simply created a floor, but did not in any way create a ceiling that limited the employee's notice to the minimum requirements contained in the Code.

Justice O'Ferrall, concurring in the result, engaged for his part in a discussion about how a lay person reading the impugned termination provision might be forgiven for thinking that the parties did indeed intend to limit the notice or pay in lieu to the minimums prescribed by the Code. He noted that courts have historically not been interested in discerning the parties' intentions from the written words of the contract, but rather in applying certain interpretive tools that are designed to protect employees as a result of the perceived inequality of bargaining power between themselves and their employers. He identified at least two of the interpretive principles which were operative in this case:

1. 1) Termination provisions will only rebut the presumption of reasonable notice if they are absolutely clear.
2. 2)When faced with a clause in an employment contract that could reasonably be interpreted in more than one way, the court ought to prefer the interpretation which gives the greatest benefit to the employee.

He summarized these principles as: "what it takes to satisfy a court that presumptions in favour of the employee, as mandated by previously-decided jurisprudence, have been rebutted."

Click here to read about best practices when drafting a termination.....

Article written by: Claire Himsl

Article published: August  2, 2019 / Faskin

Article spotted by: Kathryn Benson/Posted by: Louise Burden