There is no doubt that it is the odd employment contracts that receive most of the attention. The well-drafted and effective employment contract passes quietly in the night while the poorly constructed, often unenforceable terms, remain in the spotlight.
The Absence of a Severability Clause
In a recent case, the Ontario Superior Court examined a contract that contained two distinct clauses. The first dealt with termination without cause and the second clause considered the subject of termination with cause.
In this instance, the employee, a Director of Sales with a ventilation and climate system company, was terminated without cause. The employee’s contract contained a clause addressing the possibility of termination without cause (clause 1), and the employee took no specific issue with this aspect of the contract.
However, the plaintiff employee did take issue with the second clause (clause 2) dealing with termination with cause. This clause was not applicable directly to the facts of this case as the plaintiff has been terminated without cause. However, the employee argued that as clause 2 violated the Employment Standards Act, the entirety of the contract dealing with termination, including clause 1, must fail.
Frequently an employment contract will have a term creating a right of the judge to “sever” or eliminate the offending clause. This agreement lacked such a term. A well-drafted contract should always contain something to this effect, less the entire contract be voided due to the presence of one term that conflicts with employment legislation.
The issue then before the judge was whether the offending clause 2 caused the entire contract to become unenforceable absent this severability term.
Distinct & Separate Term
The Court found in favour of the employer and concluded that the poorly written clause 2 was clearly a distinct and separate term and could not be argued to cause the entirety of the termination provisions to be voided. Despite the absence of a severability clause, the court refused to void the entire contract due to one offending aspect.
This was an unusual case and likely the first time such an argument had been made by an employee.
The case does illustrate, yet again, the need for painstaking care in the drafting of an employment contract. Employers should exercise caution and seek the advice of experienced employment lawyers when drafting a contract for their employees.
Employers’ Take Away
Employment agreements can be a useful tool to set termination payments. This is no time for employers to rely upon internet searches for precedent terms. Preventive legal advice is a must to ensure the viability of your corporation’s employment contracts. The law is constantly changing, and so even existing contracts should be updated on a regular basis.
This was a difficult case for the plaintiff employee. He lost the case and was also required to pay a substantial portion of the employer’s costs which was set at $16,000. Litigation is high stakes poker and the time and expense can be significant. Employees should get advice before they act and understand their risks.
Get Advice and Know Your Rights
For advice on this issue of employment contracts and, indeed, on and all employment law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.
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