In 2020, Waksdale v. Swegon North America was a ground-breaking case which held that employment agreements with one illegal termination provision can invalidate all termination provisions in that contract. Even the severability clauses, also called ‘saving clauses’ will not protect an employer whose contract contains an illegal provision, as affirmed by a recent case from the Ontario Superior Court, Wilds v. 1959612 Ontario Inc.
What Happened?
Wilds was terminated without cause by her employer, “Gibson”. Gibson failed to pay her
statutory minimum entitlement to one week of termination pay; her minimum entitlement to payment of all accrued and unused vacation pay, and; her contractual entitlement to unpaid wages for her earned bonus. Gibson intended to make these payments conditional upon Wilds’ agreement to a Full and Final Release. In trying to do so, Gibson had relied on a provision in their employment contract which said:
“We may terminate your employment for just cause at any time without notice,
pay in lieu of notice, severance pay, or other liability, other than any notice, pay
in lieu of notice or severance required pursuant to the applicable employment
standards legislation” [emphasis added]
The contract went on to list a variety of circumstances that Gibson said constituted cause, but which did not actually rise to the level of statutory just cause. Statutory just cause under the Employment Standards Act (“ESA”) entails wilful misconduct, wilful negelect of duty, or wilful disobedience which is not trivial and is not condoned.
What did the Court Say?
In the judgement in favour of Wilds, the Court stated that trying to assert cause where there would be none, particularly in an effort to circumvent ESA minimum entitlements, is a violation of the ESA. Even the saving language in the provision above did not redeem it.
The Court also said the saving clause in the employment contract could not be relied on by Gibson in these circumstances. A saving clause in an employment agreement does not have any effect on provisions that have been made void by statute.
To allow illegal provisions to be saved would create the risk that employers will include illegal provisions into their employment agreements in the hope that the employees will accept them and not challenge them in court. The Court explains how this would “flout” the intention of the statute, which is to protect employees.
Contact Us
If you are an employee who has been dismissed, JPak Employment Lawyers can help inform you of your rights and advise you of the compensation you are owed.
If you are an employer, it is important to review you contractual and statutory obligations to minimize the risk of having to pay additional damages.
Contact us for information about your rights and obligations.
Authors: Jonquille Pak and Ava Clarke
Date: October 28, 2024
