A termination clause limiting an employee to minimum entitlements under Ontario’s Employment Standards Act (ESA) was upheld by the Superior Court of Justice, which ruled the provision did not violate statutory requirements and clearly excluded common law notice.
In Bertsch v. Datastealth Inc., the plaintiff, G.B., was terminated after approximately eight and a half months of employment. He was provided with four weeks’ pay in lieu of notice, exceeding the ESA minimum of one week. G.B. launched a claim seeking 12 months’ notice, arguing that the termination provisions in his employment contract were void due to ambiguity and non-compliance with the ESA and its regulations.
The defendant employer, Datastealth Inc., brought a Rule 21 motion to strike the claim, asserting that the termination clause was legally valid and that no tenable cause of action existed.
“This is a good example where the court’s interpretation of the agreement at this stage will be useful, efficient and just,” the court said.
Termination clause limited to ESA minimums
The contract stipulated that the employer would provide “only the minimum payments and entitlements, if any, owed… under the ESA and its Regulations,” and explicitly stated that this satisfied any common law or contractual entitlement to notice.
The court reviewed whether the clause properly excluded common law entitlements and avoided breaching the ESA, particularly Ontario Regulation 288/01, which limits when an employer can deny termination pay or severance pay.
The plaintiff argued that the clause was void because it permitted dismissal without notice for “cause,” without distinguishing between general just cause under common law and the narrower ESA standard of “wilful misconduct, disobedience or wilful neglect.”
Under the ESA, an employee is only disentitled to termination pay in limited cases. The court noted it is well established that “just cause” at common law includes a broader range of misconduct than the ESA’s stricter standard.
But the court found that the Datastealth contract did not violate this rule.
“There is no reasonable alternative interpretation of the relevant clauses here that might result in an illegal outcome,” the court said. “There is no reasonable interpretation which would be contrary to the minimum requirements of the ESA and regulations.”
Clarity and enforceability upheld
The plaintiff’s argument relied on precedents like Waksdale v. Swegon North America Inc., where a contract was invalidated because the “with cause” termination provision failed to comply with the ESA, thereby tainting the entire termination scheme. But the court distinguished the Datastealth clause from Waksdale, finding it “clear and unambiguous.”
“I do not find any ambiguity here,” the court ruled, rejecting the plaintiff’s position that the agreement was unclear or potentially misleading.
The court also noted the inclusion of a “failsafe” clause in section 11(a), which provided that if the employee’s contractual entitlements fell below ESA minimums, the ESA would prevail. While such clauses cannot save an illegal provision, the court determined that the failsafe was not required in this case because the termination provision itself was valid.
“The exclusion of common law notice in this case is clear and it is enforceable. The limitation of compensation is also clear and enforceable.”
The court further clarified that although a power imbalance typically exists between employers and employees, that presumption did not override the clarity of the contract in this instance.
Motion succeeds under Rule 21
The employer’s motion to strike the claim under Rule 21.01(1)(a) was granted. That rule allows a party to bring a motion to determine a question of law before trial where the facts are not in dispute. The court found it was “plain and obvious” the plaintiff’s claim could not succeed, as the termination provision did not breach the ESA.
The court also rejected the plaintiff’s argument that interpreting the contract required a review of surrounding circumstances. Citing Sattva Capital v. Creston Moly Corp., the court noted that contract interpretation can be resolved at the pleading stage when there are no disputed facts requiring a trial.
As a result, the court struck out the plaintiff’s wrongful dismissal claim without leave to amend.
“The defendant did not breach the contract when it gave notice as it did.”
Costs of $6,000 were awarded to the employer, payable within 30 days.
For more information, see Bertsch v. Datastealth Inc., 2024 ONSC 5593 (CanLII).
