An Alberta-based construction employer’s decision to dismiss a senior executive has shed light on how courts may interpret carefully negotiated termination clauses.
The dispute involved J.S., a veteran construction professional who alleged he was wrongfully dismissed from Clark Builders. The court concluded that his original employment agreement — which provided for 90 days’ notice or pay in lieu of notice — was binding. The result: the employer was required to pay J.S. only 90 days’ compensation, not common law notice.
Background
Clark is an Alberta-based construction company serving institutional, commercial and industrial clients. J.S., with more than four decades of experience in the industry, joined Clark after extensive negotiations, culminating in a formal Offer of Employment and subsequent Employment Contract.
At issue was whether the contract’s termination provision was ambiguous and if changes to J.S.’s role over time meant the employer could no longer rely on the original clause.
The parties agreed J.S. started as VP Corporate Operations reporting to B.G., then chief operating officer. From the outset, both sides contemplated that J.S. would eventually be promoted to COO upon B.G.’s retirement. Negotiations around compensation, responsibility and potential career path were extensive, with J.S. rejecting several written offers before signing a final contract. J.S. personally amended certain key clauses, including the termination provision.
“The required approach … in interpreting a contract, is to consider the factual matrix and surrounding circumstances,” the court stated, quoting established principles. However, the court emphasized that such background “cannot be used for the purpose of adding to, subtracting from, or varying the agreement.”
Ultimately, J.S. inserted language directing that an employer-initiated termination would be governed by “notice provisions as described in the Offer of Employment letter,” rather than by provincial employment standards alone. The offer letter specified that if the employer terminated J.S. without cause, the required notice would be 90 days. J.S. later argued that the contract was ambiguous — or that his duties had changed so substantially when he took on greater responsibilities as COO that the original termination clause no longer applied. The court disagreed.
Termination clause found enforceable
In finding the clause valid, the court underscored J.S.’s sophistication: he was a long-time construction executive who understood contracts and had a high degree of bargaining power. The court noted that Clark’s standard form contract was extensively marked up by J.S., who had insisted on a clearly outlined plan for his eventual promotion. Because J.S. personally revised the termination clause, and because the negotiations were two-sided, the court concluded the contractual language was both clear and fair.
“This was not a circumstance where [J.S.] was presented with a standard form agreement … far from it,” the decision noted, adding that J.S. “took the agreement home and made amendments” before signing.
The court rejected J.S.’s claim that the wording could be read to mean a “minimum” 90 days instead of a fixed period, determining the contract “can only reasonably bear one interpretation.” It also dismissed the idea that any ambiguity should automatically be resolved in the employee’s favour. According to the ruling, the principle of interpreting uncertainty in favour of an employee generally arises when there is an imbalance in bargaining power, which was not the case here.
Changed substratum doctrine
J.S. further argued that the “changed substratum” doctrine voided the termination clause, because his responsibilities evolved from VP-level work to COO duties. Quoting established law, the court described that doctrine as covering situations where “the employee’s level of responsibility and corresponding status has escalated so significantly … it can be concluded that the substratum of an employment contract … has disappeared.”
Yet the court found that when J.S. was hired, it was explicitly understood that he would become COO. The Employment Contract even included clauses anticipating possible changes to duties, compensation and reporting lines, confirming the contract would remain in effect through those changes.
Because J.S.’s promotion was expected from the start, the court determined there had not been a fundamental shift in his employment, stating that “it is difficult to conclude [these changes] were a significant, radical or dramatic change in his employment with Clark.”
Allegations of just cause
Although the employer initially raised just cause related to a multi-million-dollar profit write-down on numerous construction projects, Clark later withdrew that plea. J.S. argued the employer’s attempt to claim just cause at the time of dismissal amounted to repudiation of the Employment Contract, rendering the 90-day clause unenforceable.
The court rejected this, citing ample grounds for Clark to suspect cause, especially given J.S.’s senior role and oversight responsibilities. The ruling found that “provided there is a good faith basis for the employer to allege just cause … an employer who subsequently decides not to pursue just cause is not precluded from relying on a without cause termination provision.”
Evidence showed Clark uncovered significant discrepancies in financial reports, with high-level executives, including J.S., collectively accountable. Though the court declined to decide if just cause existed, it did rule Clark had a reasonable basis to question J.S.’s performance. The judge concluded there was no bad faith or dishonest motive in the employer’s cause allegation.
Damages awarded
Because the court found the contractual termination provision enforceable, J.S. was entitled only to 90 days’ pay in lieu of notice. That amount — calculated at $939.73 per day in salary plus vehicle allowance and benefits — came to $86,699.70. The court declined to grant J.S. any bonus for the notice period, noting that no executive bonuses were paid due to the employer’s overall financial losses. It also declined to include J.S.’s Employee Share Ownership Program shares in the award, ruling such share-related losses were outside the scope of this wrongful dismissal claim.
“Employees’ rights and shareholders’ rights are distinct,” stated the court, noting that J.S. had not advanced a separate share-value claim against the appropriate entity.
Had J.S. succeeded in voiding the termination clause, the court said it would have awarded 12 months’ pay in lieu of notice, minus mitigation income, reflecting his senior position and the length of service. However, that alternate finding did not apply once the 90-day clause was deemed enforceable.
Underlining its reasoning, the court pointed to the clarity of the termination clause, the good-faith negotiations that led to it and J.S.’s high-level knowledge of employment contracts. J.S. had revised the clause himself, and both sides had agreed to and signed the amended version.
For more information, see Singh v Clark Builders, 2025 ABKB 3 (CanLII).
