Supreme Court weighs in on termination clauses

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A recent ruling by one of Canada’s highest trial courts is reinforcing a number of earlier decisions which outline just how important clear language is when it comes to termination clauses.

“This case, like the others that came before it, again affirms the importance of careful drafting,” says Alison Bird, an associate with full service law firm Cox & Palmer.

Halifax-based Bird is referring to a case in which dismissed engineer Robert Bellini argued that a clause in his employment contract was not sufficient to remove his entitlement to reasonable notice.

The termination clause at issue stated, in part:

“If it becomes necessary for us to terminate your employment for any reason other than cause, your entitlement to advance working notice or pay in lieu of such notice, will be in accordance with the provincial employment standards legislation.”

However, Bellini insisted that the Nova Scotia Labour Standards Code rendered the clause invalid and pointed to Section 72 which states:

“[A]n employer shall not discharge, suspend or lay off an employee, unless the employee has been guilty of wilful misconduct or disobedience or neglect of duty that has not been condoned by the employer, without having given at least … two weeks' notice in writing to the person if his period of employment is two years or more but less than five years.”

Bellini, who had been with the firm for approximately three years, argued that the words "at least" established the minimum requisite notice an employer can provide, rather than the maximum notice to which an employee is entitled.

“As a starting point, the court noted that clear and express language was required to deprive employees of the right to reasonable
notice of termination, and that the Labour Standards Code is remedial and ‘should add to the rights of employees and not diminish those rights,’” said Bird.

The court ruled that the termination clause was ambiguous at best and noted that it would not have been difficult to draft a clearer alternative. In the absence of clear language, the court was not prepared to "apply a strained interpretation to attribute such meaning to contract language that does not specifically say so."

“Accordingly, the court concluded that the termination clause did not oust the employee's entitlement to reasonable notice, and awarded him damages equivalent to six months' notice of termination,” reveals Bird.

The decision, she says, should serve as an important reminder to employers.

“This case again reminds us that termination clauses will typically be interpreted in favour of the employee, and very clear language is required to remove their entitlement to reasonable notice,” she said.
 
“It is important that employers and their legal counsel pay strict attention to the language of the applicable employment standards legislation and consider its effect on the interpretation of the termination clause.”
 
The full case can be accessed here Bellini v Ausenco Engineering Alberta Inc., 2016 NSSC 237
 

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