Employers Beware: Your severability clause may not save your enforceable “without cause” termination provision

On June 17, 2020, the Ontario Court of Appeal made a significant ruling in the decision of Waksdale v Swegon North America Inc.,[1] reminding employers yet again to review their employment agreements as a whole, and not on a piecemeal basis.

The main issue before the Court was whether the unenforceable “for cause” termination provision rendered the “without cause” termination provision unenforceable. In this case, both the “for cause” and “without cause” termination provisions existed as stand-alone, separate terms in the employment agreement.

In the Waksdale v Swegon North America Inc. case, the Ontario Court of Appeal reversed the Motion Judge’s decision which upheld the “without cause” provision as a “stand-alone, unambiguous and enforceable clause.” In so doing, the Ontario Court of Appeal ruled that “it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.” The Court also declined to apply the severability clause which would otherwise save the enforceable “without cause” termination provision. 

By declining to apply the severability clause, the Court effectively “linked” the two separate termination provisions by declaring that if one is found unenforceable, both provisions are unenforceable. Termination provisions are therefore to be read and understood together.

What does this mean for employers? If both termination provisions in an employment agreement are declared null and void by a court, an employee will be entitled to common law reasonable notice, resulting in potentially significant exposure to an employer. If you have any questions regarding this case law update or need assistance revisiting your termination provisions, please do not hesitate to contact any member of the Dentons’ Employment and Labour team.

[1] 2020 ONCA 391

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Stefanie Chimienti

About Stefanie Chimienti

Stefanie is an associate in the Employment and Labor group at Dentons. She advises Canadian and international companies on all areas of employment and labor matters, including employee hiring, employment standards, human rights, employee benefit plans, labor relations, and workplace safety and insurance matters. She also provides employment and labor advice on corporate transactions.

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