The Ontario Court of Appeal Upholds Decision on “Greater Of” Termination Provision
Many termination provisions employ “greater than” language. Generally, this provides a certain package to terminated employees unless that amount it is less than what the employee is entitled to under the Employment Standards Act, 2000 (“ESA”), in which case, the employee receives their ESA minimums. However, in the 2019 decision of Andros v. Colliers, the Ontario Court of Appeal (“ONCA”) upheld the lower court’s decision in voiding the following “greater of” termination provision on the basis that it breached the ESA:
The company may terminate the employment of the Managing Director by providing the Managing Director the greater of the Managing Director’s entitlement pursuant to the Ontario Employment Standards Act or, at the Company’s sole discretion, either of the following:
a. Two (2) months working notice, in which case the Managing Director will continue to perform all of his duties and his compensation and benefits will remain unchanged during the working notice period.
b. Payment in lieu of notice in the amount equivalent of two (2) months Base Salary.
The ONCA held agreed that subsection (a) of the provision breached the ESA because it did not provide for statutory severance and that subsection (b) of the provision breached the ESA because it did not provide for statutory severance or benefits.
The following principles founded the basis for the ONCA’s conclusion:
- Under the ESA, one cannot contract out of the minimum standards unless the parties contract for a greater benefit.
- If a termination provision breaches the ESA, it is not possible to void the piece of the provision that offends the ESA. In other words, if any part of a termination provision breaches the ESA without clearly substituting a greater benefit, the entire clause will be void.
The ONCA upheld that there were two distinct parts to the termination clause – the ESA portion and the subsection (a) / (b) portion. As such, the ONCA agreed that the first part of the clause did not cast ESA entitlements upon second part.
As a result of the second part of the clause not having ESA entitlements cast upon it, this case was found to be distinguishable from cases where courts have held that mere silence regarding ESA entitlements is insufficient to establish an attempt to contract out of the ESA and from cases where courts have held that there must be explicit language barring payments required by the ESA in order to establish the clause breaches the ESA.
The ONCA also distinguished Amberer v. IBM Canada Ltd., 2018 ONCA 571 because the “failsafe provision” in Amberer captured the entire termination clause as opposed to this case where the ESA portion of the clause did not apply to the distinct second part of the clause.
Though it did not need to determine whether the provision had ambiguity, the Court held that the employee would not have known at the time he signed the agreement what his entitlements would be at termination, which is required (per Laskin J.A. in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158).
Ultimately, the ONCA’s logic was that while part two of the clause may provide the employee with more notice than the ESA would (i.e. a greater benefit in respect of notice), part two of the clause still attempts to limit other ESA entitlements (i.e. severance pay in subsection (a) and severance pay and benefits in subsection (b)).
The takeaways from this case are the following:
- termination provisions outlining optional outcomes based on the “greater of” need to be carefully drafted such that there is no possible interpretation that the ESA can potentially be breached;
- it should be clear to the employee what they will be entitled to upon termination; and
- courts continue to ‘split hairs’ in distinguishing termination provisions between cases.
Accordingly, there continues to be great uncertainty surrounding what conclusion a Court will come to despite significantly similar language in precedents.
The HRTO Grants Significant Award for Discrimination
As outlined in our December 2018 Newsletter, the Human Rights Tribunal of Ontario (“HRTO”) held in Haseeb v. Imperial Oil that it was discriminatory for an employer to require job candidates to be permanent residents or Canadian citizens in order to be eligible for a job. In the decision on remedy, the HRTO awarded Mr. Haseeb payment for lost income from the discriminatory event up to the date of the hearing (which was a span of four years!) and $15,000 for injury to dignity, feelings and self-respect. Compensation for lost income is based on the principle that the award is intended to restore the applicant to the position they would have been in but for the discrimination. In this case, that was the applicant having been able to take the job offer and engage in what the HRTO determined to be long-term employment. The total award of $120,000 is a significant one and a cautionary tale to employer’s that discriminatory practices can be costly, particularly when the remedy of lost income can be established.