A recent decision of a Small Claims Court judge in Ottawa is illustrative of two concepts. The first is that the jurisdiction of this court of matters involving an amount up to $25,000 allows a valuable remedy that is readily and fairly inexpensively available to an employee. Small claims courts have no right of pre-trial examination for discovery and proceed to trial relatively quickly.

This decision serves also yet another example of the need for clarity and precision in drafting an effective termination clause designed to limit a company’s exposure to wrongful dismissal damages.

It is clear that an employment contract may eliminate a common law wrongful dismissal claim provided that (1) the agreement complies with the minimum standards of the Employment Standards Act and (2) it is clear and unambiguous and (3) it ideally states that the sum offered is intended to extinguish all common law remedies.

The Contract

In this instance, the agreement purported to give the employer the right to terminate, intending to limit the common law severance claim, by these words:

Your employment may be terminated for cause at any time without notice or payment in lieu thereof.  Your employment may be terminated for any other reason by the company upon delivery of one week’s notice per year of Espial service or payment in lieu thereof, or such other amount as is required under the Employment Standards Act, whichever is greater.

This wording was not effective for three reasons. The first is that the contract did not allow for the continuation of benefits as is required. The law is clear that to be a valid contracting out of the common law claim, the agreement must be in compliance with the minimum standards required by the Employment Standards Act.

The second was that the clause was ambiguous in its interpretation in that there was no reference to potential severance pay, a sum due under the statute after five years of employment.

The third argument was that the contract did not state that this termination clause was one that eliminated the common law remedy.

The claim succeeded and $25,000 was awarded as damages. The plaintiff had been employed slightly less than three years.

Employers Take Advice Before You Act

The case is a prime example of the need for legal advice to ensure an effective contract is in place. This indeed can be done.

Employees Also

This issue of an effective employment contract is confusing and complex. The difference between a common law claim and that offered by the contract can be considerable. The means of a Small Claims Court remedy can offer a quick and reasonable legal remedy.

Get Advice, Then Act

Contact the offices of Toronto employment and labour lawyers Mallins Law. We regularly advise employees and employers on legal workplace issues. Contact us online or by phone at 647-792-0310 to schedule a consultation.