Getting the language wrong in an employment contract can be a very costly mistake for employers.
A recent Ontario Court of Appeal ruling underscores that fact – and reinforces a very simple lesson. If the contractual termination provisions run afoul of employment standards legislation, the entire contract could be tossed out.
That’s a lesson CannonDesign learned after it terminated an employee without notice or cause.
What happened
Farah Rahman was hired by CannonDesign as a senior architect, principal and office practice leader. She had been on the job for more than four years when her employment was terminated on April 30, 2020, without notice or cause.
The employer gave her four weeks’ base salary.
Rahman sued for wrongful dismissal and asked the court to declare that the termination provisions in her employment contract were void because they conflicted with Ontario’s Employment Standards Act, 2000.
The contract
There were two just cause provisions in Rahman’s contract – one in her offer letter and one in the officer agreement she signed.
The Offer Letter provision states that no notice will be given if there is just cause to terminate. It reads as follows:
“CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.”
The just cause provision in the Officer Agreement states that “if the Employee is terminated for cause, Paragraph 3(a) applies”. Paragraph 3(a) provides that Rahman would receive one month’s notice.
While the two provisions conflict, because of the stipulation in the Offer Letter that in such a situation, its terms prevail, it is the just cause provision in the Offer Letter that governs, the court said.
When her employment was terminated, Rahman was CannonDesign’s most senior Canadian employee. She had overall responsibility for ensuring the smooth operation of the Canadian operations, including leading the business planning and strategy.
The ruling
The Court of Appeal for Ontario wasted no time in getting to the crux of the issue.
“This court has repeatedly held that if a termination provision in an employment contract violates the ESA – such as a “no notice if just cause” provision – all the termination provisions in the contract are invalid,” it said.
Therefore, CannonDesign could no longer rely on the termination provisions at all – opening it up to common law damages.
The damages
The Court of Appeal did not set the damages. It simply declared the termination clauses in the employment contracts void and sent the case to Superior Court to determine the amount to be awarded for failure to provide reasonable notice.
For more information see Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 (CanLII)
