The Ontario Divisional Court recently affirmed the lower court’s decision in the case of Miller v. A.B.M., an important case with respect to the interpretation of termination provisions in employment contracts. Regular readers of this blog may recall our earlier blog discussion about the lower court’s decision.
In Miller, the employee signed an employment agreement with the following termination clause: “Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.” The termination provision did not expressly state that benefits would be continued during the statutory notice period under the Employment Standards Act, 2000 (the “ESA”). As a result, the court found that the termination provision contravened the ESA. In upholding the lower court’s decision that the termination provision was void and common law notice should instead be substituted, the Divisional Court made the following findings.
First, the court stated that the employment agreement in question distinguished salary, pensions and car allowance under the heading of ‘remuneration’, but that the termination provision specifically just referenced salary. As a result, it was clear that just salary was to be provided on termination.
Second, the court found that the employment agreement’s silence on providing benefits during the notice period did not lead to a presumption that benefits would be provided. At best, the court found that there was an ambiguity in the agreement with respect to the question of whether benefits would be continued, and ambiguities should be interpreted against the drafter (in this case, the employer).
This case confirms the law set out in earlier decisions such as Wright v. Young and Rubicam Group of Companies and Stevens v. Sifton Properties Ltd. In short, in order to ensure that the termination provision in an employment agreement is not set aside, it must be carefully drafted and it must not appear to undercut the minimum provisions of the ESA. If the termination provision does not expressly state that benefits will continue during the ESA notice period, then the employer risks having the termination provision set aside.
For employers who have not had the termination provisions in their employment agreement templates reviewed recently, now would be a good time to ensure that they are in order and to consider updating them if they are not.