A termination clause has been struck down by an Ontario court because it stated that no payments would be made in case of a “just cause” termination.
Paul Summers was a senior draftsperson at Oz Optics in Ottawa. He was terminated on Feb. 28, 2022. At the time he was 61, earning $71,000 plus benefits and had been with the company for almost three-and-a-half years.
He signed his employment agreement when he started, on Oct. 15, 2018. Here is the language of the agreement relating to termination “with cause.”
This Agreement may be terminated effective at any time for cause by OZ OPTICS without any notice or pay in lieu of notice, or severance pay, or payment to the Employee whatsoever, except payment of wages and vacation pay earned to the date of termination. Cause includes, but is not limited to, acts of theft, fraud, insubordination, conflict of interest and documented unsatisfactory performance, as well as any violation of Schedules “A”, “B”, and “C” to this Agreement.”
Note: bold section was highlighted by court.
The court said this clause allows Oz Optics, when terminating for cause, to make no payments to the employee of severance pay or pay in lieu of notice.
Citing Rahman v. Cannon Design Architecture Inc., the court said that if a termination provision violates the Employment Standards Act — such as a “no notice if just cause” provision — all the termination provisions in the contract are invalid.
Employees in Ontario are entitled to notice of termination or termination pay, as well as severance pay, it said — unless one of the “enumerated subsections exempts them from such entitlements.”
Wilful misconduct a higher bar than just cause
An employee who has been guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer” is not eligible to receive ESA entitlements for termination and severance, it said.
Just cause is a lower bar than wilful misconduct, the court said. Not all cases of just cause rise to the level of wilful misconduct.
“The conduct must be ‘preplanned’ and wilful in order to disentitle an employee from their statutory entitlements,” the court said.
Oz Optics said there was no intent on its part to contract out of its obligations under the ESA.
“I can not accept that submission,” the court said, in ruling the termination clause was invalid as a result.
Notice period
It then turned its attention to calculating the notice period for Summers.
The court examined the Bardal factors — character of employment; length of service; age; and availability of similar employment) in coming up with a number.
It also noted that Summers was not bilingual, which can restrict employment opportunities in the Ottawa area. Summer asked for eight months’ notice while his employer countered with three to four months.
The court settled on six months as an appropriate period, minus the payment made to him at time of termination. It also awarded 10 per cent of his wages as benefits, since no alternative figure was put forward by the employer.
Summers earned $528 performing golf course maintenance work, but the court said it would not deduct that income from the notice period.
Mitigation efforts
Summers sent his resume in to about 30 employers in the Ottawa area, and used the online job board Indeed. He also tried to leverage his network in his search.
He secured five job interviews, but had no offers at the time of the trial. The court said Oz Optics did not prove Summers failed in his duty to mitigate his damages.
Award
The total amount awarded, including benefits and minus the $5,506.87 he was paid at time of termination, was $35,753.13.
No order was made on costs, but the court invited Summers to provide a concise written submission, including a bill and copies of any offers to settle within two weeks of the release of the reasons in this case.
For more information see Summers v. Oz Optics Limited, 2022 ONSC 6225 (CanLII)
