On January 14, 2021, the Supreme Court dismissed an application for leave to appeal from the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391. This means that the Court of Appeal decision will stand and gives us a great opportunity to take a closer look at the decision in Waksdale and its impact on employment law.
Waksdale was a wrongful dismissal case. Mr. Waksdale worked with his employer, Swegon North America Inc., for approximately nine months before he was terminated without cause. His employment contract contained provisions for termination without cause and termination with cause, along with a severability clause. His employer admitted that the termination with cause provision violated the Employment Standards Act (“ESA”). The question was what impact this had on Mr. Waksdale’s termination without cause.
The motion judge concluded that because the employer was not relying on the termination with cause provision, its invalidity was irrelevant. Since the termination without cause provision was valid, the employer was entitled to rely on it. Under the termination without cause provision, Mr. Waksdale received two weeks’ severance pay – significantly less than he would have received at common law, but more than the minimum entitlements under the ESA.
Mr. Waksdale appealed to the Court of Appeal and was successful. The Court of Appeal held that an employment agreement must be interpreted as a whole and not on a piecemeal basis. It stated that “[t]he correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA” (para. 10). The fact that the employer did not rely on the invalid provision at the time of termination was irrelevant because the court must determine enforceability of the termination provisions at the time the agreement is entered into.
The Court of Appeal noted that it was possible for an employer to gain the benefit of an illegal provision even if it was not ultimately relied upon at the time of termination. For instance, an employee may strive to comply with an unenforceable termination for cause provision, not realizing that it is contrary to the ESA.
The Court of Appeal rejected the employer’s argument that it could rely on the severability provision in the employment contract to sever the offending provision. It held that “[a] severability clause cannot have any effect on clauses of a contract that have been made void by statute” and the two termination clauses had to be interpreted together (para. 14).
Waksdale demonstrates the importance that courts place on ensuring that ESA minimums are satisfied. As the Court of Appeal has repeatedly held, the ESA is remedial legislation designed to protect the interests of employees. When an employee is terminated, careful attention must be given to all termination provisions in the employment contract, even if the employer did not purport to rely on that provision.
For employers, the Court of Appeal decision serves to underscore the importance of ensuring that employment contracts – particularly termination with and without cause provisions – are drafted in accordance with the ESA. Non-compliance with the ESA minimums can be costly, as it was for Mr. Waksdale’s employer.
