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Employment & Labour

Uncertainty over termination clauses breeds employment litigation

Contradictory case law over the enforceability of termination clauses makes them one of the most-litigated parts of the employment contract, Toronto employment lawyer Christopher Achkar tells AdvocateDaily.com.

In a recent decision, the Ontario Court of Appeal ruled in favour of an employer by concluding it complied with the Employment Standards Act (ESA) when invoking the termination clause in the contract of a three-year employee.

But Achkar, the founder of Achkar Law, says employers should not get carried away with the result since it seems that for every decision that goes against workers, he can find another by the province’s top court in their favour.

“Termination clauses feature in most of the fights employment lawyers are involved in,” he says. “The law is always changing, and when you get cases coming out every other week that contradict each other, it makes for uncertainty.”

Achkar says the flip-flopping jurisprudence in the area has led to debates among lawyers about how specific and detailed the wording of termination clauses needs to be in order for a judge to enforce it. Still, he says there are some best practices for employers looking to maximize the chances of success.

For example, he says the clause should specify that the employee will receive on termination all of their entitlements under the ESA, including pay in lieu of notice, severance pay and the continuation of benefits. Employers should also explicitly state that the clause ousts the common law entitlement, Achkar adds.

“Honestly, there is no science to this anymore,” he says. “You can be careful by including key phrases, but it won’t necessarily succeed.”

Despite the uncertainty, Achkar says employers must at least attempt to have enforceable clauses, particularly for longer-service employees.

When they do end up in litigation, he says employers may be more inclined to take a pragmatic approach for cases involving shorter-term workers, where the gap between the common law and statutory notice periods is not so significant.  

“If someone has worked for three years, employers will ask themselves if it’s worth fighting about the difference between three weeks' and three months' pay,” Achkar says. “It’s more contentious when the employee has worked for a long time and the difference is between eight weeks' pay and 12 months' pay.

“Sometimes, as lawyers, we have to be business partners to clients and advise them not just on the law, but on the practicalities and whether or not it’s worth spending the money to fight a case,” he adds.

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