On appeal, employer challenges worker's entitlements after termination
The Court of Appeal For Ontario recently dealt with a case involving an employment dispute between an employer and a worker.
The case centred around the validity of termination clauses in a fixed-term employment contract and the consequences of when it comes the worker's entitlements upon termination.
The employer hired the worker on a one-year fixed-term contract from July 6, 2022, to July 6, 2023, at an annual salary of $150,000. The employment agreement contained both for-cause and without-cause termination clauses.
Invalid termination clauses
On January 9, 2023, the employer attempted to terminate the worker's employment on a without-cause basis and provided her with four weeks' salary, amounting to $11,538.
The worker contended that the Termination Clauses in the contract were invalid because they violated the requirements set forth in the Employment Standards Act (2000).
As a result, the worker asserted that the employer lacked the authority to terminate her employment before the end of the term and that she was entitled to receive her salary for the remaining portion of the term, without any obligation to mitigate her damages.
Void employment contract
The employer acknowledged that the termination clauses in the employment contract contravened the Employment Standards Act, 2000 (ESA) and were therefore void.
However, the employer argued that, based on the court's decision in Waksdale v. Swegon North America Inc., the invalidity of one termination clause automatically voided all termination clauses in the contract, including the fixed-term clause.
Consequently, the employer maintained that the worker's employment was not subject to a fixed term but was terminable upon providing "reasonable notice" at common law, subject to the worker's duty to mitigate damages.
Invalid termination clause and fixed-term clause
The application judge rejected the employer's position, finding that the invalidity of the termination clauses did not affect the validity of the fixed-term clause.
Relying on the court's decision in Howard v. Benson Group Inc., the judge determined that a fixed-term employment provision was not a termination clause, as the employment relationship automatically terminates upon the expiry of the fixed term without any obligation on the employer to provide notice or payment in lieu of notice.
As a result, the worker was entitled to receive payment equal to her salary and benefits for the unexpired portion of the term, less any amounts already paid, without any duty to mitigate.
Employer's appeal of court decision
On appeal, the employer argued that the application judge failed to properly apply the Waksdale decision and that the invalidity of the termination clauses should have voided the fixed-term clause.
The employer maintained that the worker was only entitled to reasonable notice, rather than compensation for the unexpired portion of the term.
However, the Court of Appeal disagreed with the employer's arguments, finding that the application judge made no error in applying the Benson Group Inc. decision to the case at hand.
The court emphasized that Waksdale, which did not involve a fixed-term employment agreement, had no application to the present case. Waksdale merely held that the invalidity of a particular termination clause voided other termination provisions in the agreement, entitling the employee to reasonable notice upon termination.
It did not suggest that the invalidity of a termination clause converted a fixed-term contract into one terminable on reasonable notice.
The Court of Appeal dismissed the employer's appeal, upholding the application judge's decision. The worker, as the successful party, sought costs of the appeal on a partial indemnity basis of $7,729.
The employer estimated its costs at no more than $5,000 and argued that the worker should be awarded $3,750. The court found the worker's incurred costs to be reasonable and fixed the costs of the appeal payable by the employer to the worker at $7,500 on an all-inclusive basis.
