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Employment & Labour

‘In accordance with ESA’ not good enough to oust reasonable notice

By Barry B. Fisher

In this case, the Court of Appeal of Alberta dealt with a clause that said that upon termination the employee would only receive the notice “in accordance with the provincial legislation for the province of employment.” It sets out in great detail that that is all the employee is entitled to.

The Alberta Employment Standards Code, just like the Ontario ESA, says that an employer must give “at least” the number of weeks set out in the Act, in this case, one week. Therefore, the Court held, it is also permissible under the Act to pay more than the one week. As this creates an ambiguity, the interpretation that favours the employee should prevail. The Court quoted this Ontario case. The plaintiff was therefore entitled to reasonable notice.

As the Alberta Code and the Ontario Act use the same language, one could reasonably expect the same result in Ontario.

Of interest also is the concurrent opinion by Justice O’Farrell who examined the issue of why would the parties have a six-paragraph termination clause if all they meant to do was apply the doctrine of reasonable notice. In his reasons, he sets out two vastly different approaches to determining the legality of ESA clauses.

          I am compelled to concur in the result reached by the majority. The chambers judge properly applied judicially-approved principles governing the interpretation of employment contracts.

[39] However the contractual terms employed by the parties in this case have given me cause to question those principles. A lay person reading the entire termination provision of the contract (which is reproduced and appended to these reasons) might be forgiven for thinking that the parties did intend to “limit” termination notice or pay in lieu of such notice to the “minimums” set forth in the employment standards legislation, even though the parties failed to employ either of the quoted words of limitation. A reasonable observer might question why the parties needed a termination clause as lengthy and detailed as the one employed in this case to merely indicate their intention to be governed by the common law’s reasonable notice requirement. In other words, if the termination provision of the employment contract was not intended to limit termination notice or pay in lieu, what was it there for?

[40] Perhaps the best way to explain the result in this case to the appellant employer is to say that in employment law it is sometimes not as much about ascertaining the parties’ intention as it is about applying judicially-mandated principles of interpretation designed to protect employees because of perceived, and sometimes very real, inequality of bargaining power as between employees and employers. At least two of those principles were operative in this case. One was the principle that termination clauses will only rebut the presumption of reasonable notice if they are absolutely clear. The other is that faced with a clause in an employment contract which could reasonably be interpreted in more than one way, courts are required to prefer the interpretation which gives the greatest benefit to the employee.

[41] The problem, not so much with principles, but with the approach employed by the courts in interpreting employment contracts is that it may be less understandable than an approach which simply requires the court to ascertain the intention of the parties as disclosed by the words they used. Also, the rules employed in interpreting employment contracts involve presumptions against the employer which may or may not be justified in any given case. Inequality of bargaining power is not always a justifiable assumption. Small business employers and employers in the not-for-profit sector, for example, may be on a much more level playing field. Finally, prospective employers and employees who do not have access to employment lawyers may not be aware of the interpretational rules. Whether small business employers and their employees ought to be required to wade through mountains of jurisprudence in order to find the magic formula needed to achieve enforceable contract language is what is being questioned here.

[42] The courts have repeatedly asserted that there is no magic formula for limiting termination notice or pay in lieu to the minimums in employment standards legislation. However, if the analysis is not simply one of ascertaining the intention of the parties but rather one of determining whether or not a particular clause is sufficiently clear to rebut the presumption of reasonable notice or to satisfy a judicially-mandated requirement that such clause be interpreted in favour of the employee, there will indeed be a formula of sorts. The formula will be what it takes to satisfy a court that presumptions in favour of the employee, mandated by previously-decided jurisprudence, have been rebutted. Perhaps the jurisprudence requires revisiting for situations where it is clear what the parties intended, but where the words chosen do not satisfy judicial canons of construction. This is not to suggest that the considerations articulated by courts in cases such as [this case] at para 28, 134 OR (3d) 481 are not useful. It is simply to suggest that perhaps more emphasis ought to be put on ascertaining what the parties intended.

This differing judicial approach is evident in Ontario, where one set of judges seem to follow this case’s approach of closely examining the wording of the clause for potential illegality and/or ambiguity and the “parties intention” approach as set out in this recent Ontario Court of Appeal case.

Only time will tell which approach will prevail unless one day the Supreme Court of Canada agrees to address this issue and tell us all once and for all how these contracts should be interpreted.

Read More at Barry Fisher’s Employment Law Blog

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