Termination provision violated the Employment Standards Act and was therefore void
The Ontario Court of Appeal has overturned the Superior Court of Justice’s decision in a wrongful dismissal action brought against Cannon Design Architecture by a former employee. The top court found that the “just cause” provision in the employment contract violated the Employment Standards Act and was therefore void.
In Rahman v. Cannon Design Architecture, the appeal court disagreed and wrote that the motion judge erred by considering contextual factors beyond the plain wording of the termination provisions. These considerations included Rahman’s receipt of independent legal advice, the sophistication of the parties, the parties’ equal bargaining power, and the parties’ mutual intent to apply the minimum standards of the ESA.
The court wrote that under the ESA, an employee is entitled to notice of termination or pay in lieu thereof even where the employer asserts “just cause” for termination unless the employee has been “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”
Rahman’s offer letter, however, allowed Cannon Design Architecture to terminate employment without notice or pay in lieu if Rahman engaged in conduct that constituted “just cause” for summary dismissal. Relying on Waksdale, the appeal court held that the broader language violated the ESA standard of “wilful misconduct” and invalidated all the termination provisions in the contract.
The provision permitted the employer to terminate employment without providing notice or pay in lieu outside the statutory standards of “wilful misconduct, disobedience, or wilful neglect of duty,” the court wrote.
“It is the wording of a termination provision which determines whether it contravenes the ESA,” the court wrote. “Allowing subjective considerations to distort and override the wording” is an extricable error of law.
Rahman’s lawyer Stephen Moreau says his client is pleased that the appeal court agreed with her argument that the termination clause was poorly worded and declared the “illegal” clause void.
“She can proceed with her case and try and secure reasonable payments from the company or get a reasonable court order,” he says. “She’s owed reasonable notice, which could be over a year of pay instead of the four weeks they gave.”
The decision emphasizes that the legality of an employment contract must depend on the wording of the contract itself or the party’s intention and not on features that are subjective to one party, Moreau says.
Cannon Design Architecture employed Rahman in February 2016. She agreed to yearly pay of $185,000 plus benefits and bonus. However, her contract contained a “just cause” provision where Rahman would receive no compensation if she were fired for “cause” even if it did not amount to wilful misconduct.
Cannon Design Architecture dismissed Rahman in April 2020.
She filed a wrongful dismissal suit, saying the termination provisions of her written employment agreement are void because they violate the minimum standards of the Employment Standards Act.
In the summary judgement decision, Justice Sean Dunphy said the termination provisions of the employment agreement were valid and had no ambiguity. Accordingly, Justice Dunphy dismissed the action.
He declared that the termination without cause provision was enforceable because Rahman was “sophisticated” and “experienced,” earned a significant salary in a senior position and had the benefit of a lawyer to negotiate her contract.
He said that within a week of receiving the employment contract, Rahman’s lawyer raised “particular” concerns regarding the termination language of the employment contract in a letter he sent to Cannon Design. However, her lawyer raised no concerns regarding the “just cause” termination language.
