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Court of Appeal Sides With Employer – Termination Clause Upheld

By July 13, 2018November 5th, 2019Employment Law

When it comes to termination clauses in employment contracts, the common (judge-made) law has been turbulent to say the least.

We’ve seen ups and we’ve seen downs; judges have upheld termination clauses that, to us, look straight-forward and stricken down others that we thought would have been ambiguous, at best. Employers have been re-visiting their employee contracts after each of these decisions is handed down, anxious to know if their termination clause (the one that caps the employees’ entitlements upon termination without cause) will stand up in a court of law.

The Court of Appeal is taking notice, and they took an opportunity in Amberber v. IBM Canada Ltd. to reverse a lower court decision and reiterate that “[t]he court should not strain to create an ambiguity where none exists.

The Employer, IBM, relied on the following termination provision to cap Mr. Amberber’s entitlements upon termination:

TERMINATION OF EMPLOYMENT

If you are terminated by IBM other than for cause, IBM will provide you with notice or a separation payment in lieu of notice of termination equal to the greater of (a) one (1) month of your current annual base salary or (b) one week of your current annual base salary, for each completed six months worked from your IBM service reference date to a maximum of twelve (12) months of your annual base salary. This payment includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law. Any separation payment will be subject to applicable statutory deductions. In addition, you will be entitled to benefit continuation for the minimum notice period under applicable provincial employment standard legislation.  In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment.

The motion judge found this clause as a whole to be “ambiguous” and therefore unenforceable. The Court of Appeal disagreed. They thought the judge dissected the termination clause until it was unrecognizable. They said, “[t]he fundamental error made by the motion judge is that she subdivided the termination clause into what she regarded as its constituent parts and interpreted them individually. The individual sentences of the clause cannot be interpreted on their own. Rather, the clause must be interpreted as a whole. When read as a whole, there can be no doubt as to the clause’s meaning”.

This decision by the Court of Appeal by no means settles the issue of ambiguous / unenforceable termination clauses BUT it does put one notch on the side of employers when it comes to interpreting them.

Information provided herein is not legal advice. It is provided for informational and educational purposes only.  If you need advice about termination clauses or any other employment related issues please contact us.  We are your dental legal team.

DMC