Employers are often lulled into a false sense of security when they have written employment agreements for their employees. The unfortunate reality is that not all contacts are created equally. More unfortunate still is that a recent case in Ontario, Waksdale v Sweagon North America Inc., 2020 ONCA 391, has rendered some contracts useless.
In January 2021, the Supreme Court of Canada denied the Waksdale appeal, signalling their agreement with the Court of Appeal’s earlier decision and their reasoning for it. The result: the Waksdale decision stands, effectively now rendering termination provisions in most employment agreements unenforceable. The affected provisions specifically relate to keeping notice or pay in lieu of notice within the Employment Standards Act, 2000 minimums rather than within Common Law.
Why Do Termination Sections Matter?
If you are a dentist employer, you probably already know that an enforceable termination section in an employee’s contract is everything when trying to minimize the amount of notice or money you have to give that employee upon termination.
More particularly, the common law (judge-made law) says that your employees are entitled to termination notice or pay instead of notice of approximately 1 month for every year they have worked for you – up to a maximum of about 24-26 months. The only way to pay less is to have a valid written agreement with your employee that says you will pay them the minimum standards under the Employment Standards Act, 2000. That minimum is about 1 week for every year they have worked for you up to a maximum of 8 weeks.
To illustrate the point, let’s look at your loyal but sometimes clumsy dental hygienist who has been with you for 15 years. You have decided to terminate him “without cause” due to the economic downturn or simply because you found someone else who can do the job better. If your hygienist is mid-range on the pay scale (let’s say $40/hr, working ~30 hrs a week), they have a salary of ~$62,400 gross per year. When it comes time to part ways with your hygienist, there are two possible scenarios for you depending on if you have a valid contract or not:
- If you DO NOT have a valid contract: you will owe him ~15 months of notice or pay instead of notice (absent any extenuating circumstances), which is about $78,000 before deductions and remittances.
- If you DO have a valid contract: you will owe him 8 weeks of notice or pay instead of notice, which amounts to $9,600 before deductions and remittances.
On the other hand, if your hygienist became significantly incompetent or did something so egregious that he could no longer work for you, you may be able to terminate his employment with “just cause” sometimes called “with cause” or “for cause”. In such a case, he would not be entitled to any termination notice or pay instead of notice. The problem is that “just cause” termination is rarely an option for employers due to the high standard needed to prove cause. The behaviour in question has to raise to the level of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” Anything less than that would not be “just cause” for termination. Since this is such a high bar, most terminations will not fall into this category. Nonetheless, most employment agreements include sections that deal with “just cause” terminations to cover all bases.
Unfortunately, the cards are stacked against employers in Ontario when it comes to enforcing their contracts with employees. Most recently, termination sections (and “with cause” in particular) took a massive hit with the Waksdale case.
The Waksdale Case – What Changed?
In the summer of 2020, the Court of Appeal released the Waksdale case, which essentially said: if you have an employment agreement with a stand-alone termination for “just cause” section, which is unenforceable, then your termination “without cause” section will automatically become unenforceable, regardless of its content.
In a recent Oral Health article I discussed the Wakesdale case and appeals in more detail, which I encourage you to read. But the basics are that Mr. Waksdale was a short-term employee who was let go “without cause” who was unhappy with his termination package. He filed a suit asking the court to find that the termination provisions in his contract were unenforceable due to the section dealing with termination “with cause”.
Although Mr. Waksdale lost at first, when he appealed to the Ontario Court of Appeal, the court sided with Mr. Waksdale. The termination provisions “as a whole” were found unenforceable because of a deficiency in the “with cause” section. The Supreme Court of Canada then solidified the status of the Waksdale case in January as good law and precedent for other courts by refusing to hear the employer’s appeal. The refusal signals the Supreme Court’s agreement with and support of the Court of Appeal’s decision and their reasoning for it.
What Does This Mean For Me?
The bottom line for dentist employers in Ontario is this: if you had your employment agreements drafted before the Waksdale case decision, they might now be worthless.
Now is the time to revisit those old employment agreements. You need to ensure that ALL of the clauses in your contracts are valid and enforceable. It is the only way to make sure that when it comes time to part ways with your employees, you’re not stuck footing an enormous bill.
If you need help drafting or revising employment agreements, or have questions about your contracts’ validity, we are here. We are happy to help and offer more information on these and any other employment issues. DMC is dedicated to helping dentists understand and minimize the risks associated with being an employer. Send DMC an email or give our Employment Law Team a call directly at 416-443-9280 extension 206.
And for more information on recent changes, please refer to our Employment Law Changes & Updates section for the latest announcements in provincial and federal policies.