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Employment & Labour

Strong termination clauses set clear guidelines: Wise

Well-crafted termination clauses minimize an employer's exposure to unexpected compensation packages, says Toronto employment lawyer Matthew Wise, who frequently represents clients in wrongful dismissal complaints.

Wise, partner with Macdonald Sager Manis LLP, points to a recent wrongful dismissal case where a former trucking company driver was awarded a settlement and severance despite the fact he was deemed not insurable.

“The lesson, as always, is that employment contracts should have strong termination clauses, which clearly set things out,” he tells AdvocateDaily.com.

The complainant worked as a transport driver for a northern Ontario trucking firm for 30 months, facts from adjudicator Henri R. Pallard’s judgment show.

He was fired after the company was notified by its new insurer that it would not cover the driver under its policy.

The driver alleged that he was dismissed without just cause, and sought compensation in lieu of notice of termination, and severance pay.

The company argued he was not insurable, unable to perform his duties, and consequently dismissed with cause.

Pallard ruled in favour of the driver, ordering the company to pay $2,196.18 for salary and interest, and $1,055.81 in severance plus interest.

“The employer alleged the events were outside its control, and that the driver was responsible, presumably because he had violations on his driving record that made him a risk in the new insurance company’s eyes,” says Wise, who was not involved in the case and comments generally.

“The company claimed his employment contract had been frustrated, which means it had been broken, but the adjudicator ruled otherwise.”

Wise says the result might have been different had the driver been rendered unemployable because he had lost his driver’s licence for an infraction such as drinking and driving.

However, in this case, the adjudicator found that although he was no longer able to drive for the company, his contract had not been frustrated.

“The tenor of the decision seems to be that they didn’t like his driving record,” Wise says. “It seems that the previous insurance company would have continued to insure him, but the new insurers were far more strict.”

He says the takeaway is that employers need to establish explicit termination clauses that cover a wide range of possibilities.

“If you do that, in the event an employer finds themselves in this kind of scenario — where through no fault of their own they can no longer employ someone — the compensation due is clearly set out to minimize the exposure of the employer,” Wise says.

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