I estimate that a busy employment law practitioner will review (or perhaps draft) several dozen “termination clauses” on an annual basis. A lot hinges on them: for a long service employee, a termination clause could be the difference between 8-weeks pay or pay in lieu of notice and up to 24-months pay or pay in lieu of notice.
Most termination clauses are an agreement between the employer and the employee that in the event the employer elects to dismiss the employee without cause, the employee will only receive what they are entitled to under the Employment Standards Code. In other words, most termination clauses will relieve the employer from their obligation to provide common law notice of dismissal to their employees. A termination clause like this changes what is often called “floor” of notice – being the statutory entitlement – into the “ceiling”, or maximum amount recoverable.
Less frequently, termination clauses will set up a formula for determining the amount of notice/pay in lieu that an employee will get. An example is: For every full year of employment, the Employer will provide the Employee two-weeks notice, or pay in lieu of notice if the Employee is dismissed without cause, to a maximum of 52-weeks.
In Bryant v Parkland School Division, 2021 ABQB 391 (Bryant) Justice Rothwell of the Court of Queen’s Bench was asked to consider the enforceability of an (in my opinion) unusual termination clause. It went:
This contract may be terminated by the Employee by giving the Board thirty (30) days or more prior written notice, and by the Board upon giving the Employee sixty (60) days or more written notice.
This clause is unusual. It gives the Employee an immediate entitlement to 60 days notice. The employee’s entitlement appears not to change at all, despite how long they work for the employer. Moreover, it provides discretion to the employer to add notice on top of the 60 days, but does not specify the circumstances in which the Employer will elect to exercise that discretion, nor how much additional notice “more” will be.
The Plaintiff’s argument was that “60 days or more” created a “floor”, but not a “ceiling”, and therefore their entitlement to further notice pursuant to common law principles was not displaced. They further argued that the contract was silent on the circumstances the Employer would give 60 days notice, and in what circumstances the Board would give “more”. That ambiguity ought to be resolved in their favour by contra preferentum.
The Defendant took the position that the clause was clear an unambiguous, and contra preferentum had no application. Further, that it rebutted the implied entitlement to reasonable notice and did not violate any provisions of the Employment Standards Code.
The case turned, in part, on the inclusion of the words “or more”, and whether the “or more” leads to either ambiguity, or an implied meaning that the longer the employee remains, the greater likelihood they will receive not the “60 days” but the “or more”.
Justice Rothwell disagreed with the Plaintiffs that “60 days or more” was ambiguous to the level that it could reasonably be interpreted in more than one way:
“A plain reading yields on meaning: 60 days or something greater. The clause provides a fixed level of notice for all employees and allows Parkland to “give” a greater sum in its discretion” (at para 32)
An important quote to consider when approaching a clause like this is:
“An employee’s inability to calculate their exact notice period does not render the clause ambiguous” (para 34).
Typically a termination clause that is confusingly drafted will likely not be enforceable. The Court here seems to be distinguishing from ambiguity that arises as a consequence of poor drafting and a clearly drafted clause the provides one party with the discretion to give more notice- as much or little as they decide- further than what has been explicitly offered. Both lead to uncertainty for the employee, but for different reasons.
The Court’s conclusion was that “If an employee is not comfortable having the Employer determine their “y” factor (my edit: the “more” in “60 days or more”) they should not accept the contract as presented” (at para 40). In my practice, it is rare that I meet an employee that has negotiated a term of their contract other than compensation. Employees should be reminded that most terms are negotiable dependent on the relative strengths of each party’s bargaining position.
The final argument of the Plaintiff was that because another term of the contract adopted, in their view, the provisions of the Employment Standards Code, they ought to have common law recourse. This argument is based on the landmark decision Kosowan v. Concept Electric Ltd., 2007 ABCA 85 where the Court determined that a termination clause that states an employee will be terminated “in accordance with the Code” does not limit an employee to only their statutory rights. Section 3 of the Code states that nothing in the Code precludes an individual from seeking a common law remedy.
To properly limit notice to the statutory minimum, the clause needs to have limiting language that restricts the statutory reference to the appropriate provisions, or explicitly ousts an employee’s common law entitlement. However, the clause Bryant in question did not state termination was to be “in accordance with the Code” as in Kosowan– a later clause in the contract stated:
This employment contract shall be subject to the provisions of all applicable statutes of the Province of Alberta and regulations passed thereunder, as well as being governed generally by the applicable policies and procedures as established and amended from time to time by the Board of Trustees of Parkland School Division No. 70.
An employee’s entitlement to common law notice exists independently of statute. The contract in Bryant did not seek to rely on the provisions of the Code: it was not that kind of termination clause. The Court held that “the Plaintiff’s argument would have more merit if the Contract explicitly referenced the Code and Parkland sought to rely on the notice provisions of the Code” (at para 65); and “in my view, if the Code is referenced more explicit language is likely required…” (at para 78). Merely stating that the employment contract will be subject to the statutes of Alberta was insufficient to make an argument similar to the one in Kosowan, particularly since the clause itself didn’t reference the Code or seek to rely on its termination provisions.
Lastly, the clause in question did not fall short of what the Code provided. The maximum notice under the Code is 8 weeks (56 days), which is less than the 60 days the clause provided. So, it was not void for violating the statutory rights provided by the Code.
Justice Rothwell dismissed the Plaintiff’s application for summary judgment and granted the Defendant’s application for summary dismissal. He went on to state:
The interpretation of the Contract in this matter is well suited to a summary judgment/dismissal application. The matter can be justly, fairly, and appropriately determined on the record before me. Parkland has satisfied me on a balance of probabilities that the Plaintiff’s claim has no merit and there is no genuine issue for trial (para 89).
This clause has some of the hallmarks of an unenforceable clause: it is very short, it does not specifically say what the employee is not entitled to, there is no certainty as to what the employee will actually receive, and it was drafted a long time ago. Despite that, Justice Rothwell’s close analysis revealed no deficiencies. Had the Court held it was unenforceable, the plaintiff employees would have been entitled to common law notice- and while Justice Rothwell did not write any obiter on that issue, we can assume it would have been well in excess of the 60 days.
I expect that more termination clauses will be litigated via the summary judgment process in Alberta. This is an area of fundamental importance to employees and employers, and any more Alberta jurisprudence we can get on this topic will create more certainty for litigants.
Employees are almost always well-advised to have these clauses reviewed by an employment lawyer. Employers ought to be cautious in assuming the clauses they rely upon will withstand the scrutiny of the Court, and would be advised to review them with counsel.
**I was fortunate to take a Constitutional Litigation course at the University of Alberta Faculty of Law that was taught by Justice Rothwell and Justice Feehan of the Alberta Court of Appeal, then pre-eminent lawyers in their fields and since called to the bench. Their lectures on the seriousness of law in society interspersed with a “buddy-comedy” of dry humour made it an unforgettable experience.