open the following cases links,related to employment Law and summarize them in your own words and should be numbered appropriately.

1.

A Word of Caution for Employers: When Terminating Employees Say What you Mean and Mean What you Say

NOVEMBER 2, 2020

What do employment contracts and termination letters have in common? They both have the potential to end, or at least limit, an employer's liability in the event of a termination. However, to be effective, they must be properly drafted. A termination letter that fails to assert just cause for termination, and specify the reasons for cause, will be ineffective, even if cause for termination exists. Likewise, a without cause termination provision in an employment contract will be invalid and unenforceable if it is not properly worded and attempts to contract out of the statutory minimums established by the Employment Standards Act.

The recent decision of the New Brunswick Court of Appeal in Abrams v. RTO Asset Management, 2020 NBCA 57 ("Abrams") addressed both of these issues and serves as a cautionary tale for employers.

Background

James Abrams was employed by RTO Asset Management ("RTO"), and its predecessors, for approximately 29 years. The terms and conditions of Mr. Abrams' employment were set out in a detailed Employment Contract which included, among other things, a provision relating to termination without cause which stated as follows:

The Company may terminate your employment at any time without cause by providing you with written notice or pay in lieu of notice equivalent to your statutory entitlement under the province of New Brunswick employment standards legislation. If the Company terminates your employment pursuant to this paragraph, the Company shall not be obliged to make further payments to you and you will not be entitled to any additional payments under the common law as a result of the termination. In addition, the payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice or other severance pay pursuant to the province of New Brunswick employment standards legislation.

The provision limited Mr. Abrams' notice entitlement to the minimum notice prescribed under the Employment Standards Act and alleviated RTO from having to make any further payments to Mr. Abrams.

Mr. Abrams' employment was terminated in 2017 forhaving engaged in a sexual and romantic relationship with a subordinate employee. Mr. Abrams had hired the subordinate employee, disclosed confidential information to her, and later promoted her, all the while keeping their relationship concealed from RTO. When confronted with the allegations about his relationship with the subordinate, Mr. Abrams was initially dishonest but eventually confessed to the relationship and the related misconduct. At the termination meeting, RTO explained to Mr. Abrams the reasons for his termination. RTO provided Mr. Abrams a termination letter which specified that RTO felt it had cause for termination but that it was proceeding to terminate his employment on a without cause basis, without prejudice to its ability to later assert just cause for termination. Mr. Abrams was provided with four (4) weeks' pay in lieu of notice, in accordance with the Employment Standards Act and the terms of his Employment Contract. Additionally, Mr. Abrams was offered a further three months' salary conditional on him signing a release.

Mr. Abrams rejected the offer and brought a wrongful dismissal action, claiming entitlement to common law reasonable notice. A motion for summary judgment was filed by Mr. Abrams in relation to his claim for damages for wrongful dismissal.

Summary Judgment Decision

The motion judge found that RTO had just cause for termination and that there was no issue requiring a trial. RTO was granted summary judgment in its favour and the Plaintiff's claim was dismissed. Mr. Abrams appealed this decision.

Court of Appeal Decision

Termination Without Cause

Notwithstanding the fact that there was a termination letter provided to Mr. Abrams that stated RTO was of the position that it had cause to terminate his employment, the Court of Appeal held that RTO had terminated Mr. Abrams on a without cause basis. It relied on the following evidence to make this finding:

• at his termination meeting, Mr. Abrams was informed he was being dismissed without cause;
• his Record of Employment indicated he had been terminated without cause;
• he was provided four weeks' pay in lieu of notice in accordance with the termination provision in his employment contract; and
• he was provided a letter which indicated a termination without cause.

Enforceability of Without Cause Termination Provision

Upon finding that the termination had been effected without cause, the Court of Appeal then considered the enforceability of the without cause termination provision. The Court held that the provision was void as it purported to contract out of certain benefits under the Employment Standards Act, namely vacation pay and accrued wages. It relied on the language in the without cause termination provision which stipulated that RTO "shall not be obliged to make any further payments" to make this finding, and explained that if a termination clause purports to contract out of a benefit under the Employment Standards Act, the entire clause is void, not just the offending part.

Common Law Reasonable Notice

Having found that Mr. Abrams was terminated without cause, and that the without cause termination provision in his Employment Contract was unenforceable, the Court of Appeal then assessed the reasonable notice period Mr. Abrams was entitled to under the common law. The Court awarded a notice period of 24 months. The amount of the damages was in excess of $300,000.

Key Take-aways for Employers:

This decision serves as a cautionary tale to employers, and reiterates the importance of carefully worded termination letters and employment contracts. If an employer believes they have cause for termination, they should clearly and unequivocally assert that they have cause for termination and not take any actions which would undermine that decision or suggest that the termination is without cause. More specifically, an employer should refrain from making gratuitous payments to employees who have been terminated for cause or issuing a Record of Employment that states the termination is without cause. While an employer may contemplate doing these things to show some compassion to an employee who has just lost their job, doing so brings with it a risk that their ability to later rely on cause for termination will be removed. The case also reinforces the care that must be taken in drafting without cause termination provisions in employment contracts. It further illustrates the great lengths a court will go to in order to find that such provisions are unenforceable. This decision only adds to the growing number of decisions employers must consider when drafting employment contracts which attempt to limit the amount of notice an employee is entitled to upon a termination without cause.

Stay tuned - leave to appeal this decision to the Supreme Court of Canada has been filed so there may be more to come with respect to these issues.

2.

COURT OF APPEAL FOR ONTARIO

CITATION: Waksdale v. Swegon North America Inc., 2020 ONCA 391

DATE: 20200617

DOCKET: C67616

Pepall, Hourigan and Roberts JJ.A.

BETWEEN

Benjamin Waksdale

Plaintiff

(Appellant)

and

Swegon North America Inc.

Defendant

(Respondent)

Philip R. White and Jason K. Wong, for the appellant

Landon Young and Amanda Boyce, for the respondent

Heard: in writing

On appeal from the order of Justice Edward M. Morgan of the Superior Court of Justice, dated October 3, 2019, with reasons reported at 2019 ONSC 5705.

REASONS FOR DECISION

Introduction

[1] The appellant sued the respondent for wrongful dismissal and moved for summary judgment, arguing that he was entitled to damages because the respondent did not provide him with reasonable notice of dismissal.

[2] The primary issue on the motion was the legal effect of the written employment contract between the parties. The appellant took the position that the termination clause in his employment contract was void because it was an attempt to contract out of the minimum standards of the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "ESA"). The respondent conceded that the "Termination for Cause" provision in the contract was void because it violated the ESA. However, it argued that the "Termination of Employment with Notice" provision in the agreement was valid and, because it was not alleging cause, it could rely on the latter provision.

[3] The motion judge dismissed both the motion for summary judgment and the appellant's action, and awarded the respondent $16,000 for costs of the action. He concluded that the Termination of Employment with Notice provision is a stand-alone, unambiguous, and enforceable clause.

[4] In our view, the motion judge erred in law in his interpretation of the employment contract. The termination provisions are unenforceable because they violate the ESA. Therefore, we allow the appeal, set aside the motion judge's order, and order that the matter be remitted to the motion judge to determine the quantum of the appellant's damages.

Analysis

[5] The appellant began his employment with the respondent on January 8, 2018 as a director of sales. His total income was approximately $200,000 per annum. The respondent terminated the appellant without cause on October 18, 2018 and paid the appellant two weeks' pay in lieu of notice.

[6] The respondent conceded on the motion that the Termination for Cause provision in the employment contract breached the ESA. Likewise, the appellant acknowledged that the Termination of Employment with Notice provision complied with the minimum requirements of the ESA. Therefore, the issue for the motion judge was the discrete question of whether the illegality of the Termination for Cause provision rendered the Termination of Employment with Notice provision unenforceable.

[7] The law regarding the interpretation of termination clauses in employment contracts was helpfully summarized by Laskin J.A. at para. 28 of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481. The following points from that summary are particularly apt for the purposes of this appeal:

The ESA is remedial legislation, intended to protect the interests of employees. Courts should thus favour an interpretation of the ESA that "encourages employers to comply with the minimum requirements of the Act" and "extends its protections to as many employees as possible", over an interpretation that does not do so: Machtinger, p. 1003.

Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship: Machtinger, p. 1004.

[8] Laskin J.A. went on to observe that the enforceability of a termination provision in an employment contract must be determined as at the time the agreement was executed. The wording of the contract alone should be considered in deciding whether it contravenes the ESA, not what the employer might have done on termination: Wood, at paras, 43-44. Thus, even if an employer's actions comply with its ESA obligations on termination, that compliance does not have the effect of saving a termination provision that violates the ESA.

[9] In the present case, there is no question that the respondent would not be permitted to rely on the Termination for Cause provision. The issue is whether the two clauses should be considered separately or whether the illegality of the Termination for Cause provision impacts the enforceability of the Termination of Employment with Notice provision. The respondent submits that where there are two discrete termination provisions that by their terms apply to different situations, courts should consider whether one provision impacts upon the other and whether the provisions are "entangled" in any way. If they are not, the respondent argues, then there is no reason why the invalidity of one should impact on the enforceability of the other.

[10] We do not give effect to that submission. An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee's common law rights on termination, violated the employee's ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked. Here the motion judge erred because he failed to read the termination provisions as a whole and instead applied a piecemeal approach without regard to their combined effect.

[11] Further, it is of no moment that the respondent ultimately did not rely on the Termination for Cause provision. The court is obliged to determine the enforceability of the termination provisions as at the time the agreement was executed; non-reliance on the illegal provision is irrelevant.

[12] The mischief associated with an illegal provision is readily identified. Where an employer does not rely on an illegal termination clause, it may nonetheless gain the benefit of the illegal clause. For example, an employee who is not familiar with their rights under the ESA, and who signs a contract that includes unenforceable termination for cause provisions, may incorrectly believe they must behave in accordance with these unenforceable provisions in order to avoid termination for cause. If an employee strives to comply with these overreaching provisions, then his or her employer may benefit from these illegal provisions even if the employee is eventually terminated without cause on terms otherwise compliant with the ESA.

[13] In the alternative, the respondent relies on a severability clause in the employment contract which reads as follows:

You agree that if any covenant, term, condition or provision of this letter outlining the offer of employment with the Company is found to be invalid, illegal or incapable of being enforced by a rule of law or public policy, all remaining covenants, terms, conditions and provisions shall be considered severable and shall remain in full force and effect.

[14] We decline to apply this clause to termination provisions that purport to contract out of the provisions of the ESA. A severability clause cannot have any effect on clauses of a contract that have been made void by statute: North v. Metaswitch Networks Corporation, 2017 ONCA 790, 417 D.L.R. (4th) 429, at para. 44. Having concluded that the Termination for Cause provision and the Termination of Employment with Notice provision are to be understood together, the severability clause cannot apply to sever the offending portion of the termination provisions.

Disposition

[15] The motion judge's order is set aside. The only defence the respondent had to the action and the motion for summary judgment was its reliance on the Termination of Employment with Notice provision. Accordingly, we order that the matter be remitted to the motion judge to determine the quantum of the appellant's damages and the costs of the action. If the parties cannot agree on the costs of the appeal, they may file written submissions together with a bill of costs within ten days of the release of these reasons. Those submissions shall be no more than three pages in length.

"S.E. Pepall J.A."

"C.W. Hourigan J.A."

"L.B. Roberts J.A."

3.

Limiting Long-Term Incentives upon Termination & the Impact of the Pandemic on Notice PeriodsMAY 21, 2021Share on FacebookShare on TwitterShare on LinkedInShare by email

The Ontario Superior Court's recent decision in Marazzato v Dell Canada Inc. provides important guidance on two key issues: (1) the onus on employees to prove the pandemic's negative impact on their ability to mitigate; and (2) the type of language required to limit an employee's entitlements to long term incentives upon termination.

Background

The Plaintiff, Mr. Marazzato, brought an action for wrongful dismissal against his former employer, Dell Canada Inc. ("Dell"). Mr. Marazzato claimed that he was entitled to 20 months reasonable notice at common law based on the fact that he was a 59 year old employee, with 14 years of service, making $465,695.65, who had been employed as Senior Manager Director Sales at the time of termination and had to look for comparable employment during an economic downturn caused by the COVID pandemic.

Dell took the position that Mr. Marazzato's reasonable notice period should be limited to 16 months and disputed his entitlements to Sales Target Incentives ("STI") and Long Term Incentives ("LTI") during the common law reasonable notice period.

The Two Key Issues

The Court found Mr. Marazzato was entitled to a reasonable notice period of 18 months based on its review of the Bardal factors and addressed the two key issues listed above as follows:

1. The Court expressly stated that although it was asked to take into consideration the economic downturn caused by the COVID pandemic as part of its reasonable notice analysis, there was "no evidence of same" before it and that "it would not be appropriate to speculate on that submission without evidence", so this factor did not support a longer notice period.
2. The Court also found that the language of the LTI Award Agreement was "sufficiently unambiguous to exclude this part of Mr. Marazzato's compensation from his damages arising from Dell's breach in providing reasonable notice". The language was as follows:

a) the acceptance of the LTI Award Agreement was voluntary and not a condition of employment;

b) such payments were not compensation for services rendered and were outside the scope of the employment agreement; and

c) the units are "not to be used for calculating any severance, resignation, redundancy, end of service payments, bonus, long-service awards, pension or retirement benefits or similar payments, and you waive any claim on such basis".

Key Takeaways

The Court's decision in Marazzato v Dell Canada Inc. should provide employers with comfort that employees cannot merely assert that the economic downturn caused by the COVID pandemic warrants a longer notice period, without evidence to support the fact that such economic downturn actually impacted their search for comparable employment so that the court can make a "concrete determination" on this issue.

Further, the Court's decision provides employers with an example of the type of clear and unambiguous language required to limit an employee's entitlement to long term incentives upon termination. Prudent employers should ensure that grant agreements and plan documents regarding the same, unambiguously address entitlements upon termination in compliance with applicable laws and clearly oust the employee's claim to damages in lieu of their entitlements under such agreements and/or plans during the common law reasonable notice period.

employment law