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The Supreme Court MUST Reverse Waksdale Decision

By July 28, 2020February 17th, 2021Employment Law

Good News Employer Dentists!

Waksdale is Getting Appealed to the Supreme Court

The Law Firm that represents the employer that lost in that terrible Ontario Court of Appeal decision  (Waksdale) has confirmed to us that they will take the fight to the Supreme Court on behalf of their client employer.  Thank God and Goodness because if the Waksdale decision stood on its own, it would be very, very bad for all employers across Ontario.

The employer will now need to “seek leave to appeal” which means ask permission from the Supreme Court of Canada (the highest court in the land) to hear the appeal before actually being allowed to appeal the Ontario Court of Appeal decision.  The Supreme Court could say: “Yeah, we’ll hear it.  It’s important. Here are your timelines to present arguments” or “No, we won’t be hearing it.  Thank you!” and provide no reason whatsoever.  They better do what’s right for Ontario employers and hear the damn case!

Bottom line right now: the terrible Ontario Court of Appeal decision renders invalid virtually ALL employment agreement termination provisions across Ontario (especially for those employers who were smart enough to have contracts to limit their liability to begin with!).

So should the Supreme Court of Canada grant leave to appeal the decision (i.e. give permission for the decision to be heard by them)? ABSOLUTELY!  It’s too important a decision that impacts virtually all employers across Ontario who have employment agreements with their team members to NOT HEAR IT.  And if they happen to not want to hear it (which would be outright ridiculous, mind you), then the Ontario Government needs to take immediate action to pass regulations to undo Waksdale so that that decision isn’t used as a knife to pierce through EVERY EMPLOYMENT AGREEMENT.

Why is Waksdale So Bad?  And How COULD the Supreme Court Fix It?

What does the Waksdale decision do?  It stupidly punishes employers who were smart enough to introduce employment agreements (which include termination provisions that limited the amount of money they themselves would have to pay out to an employee in the event that they had to part ways).

So, let’s say the Supreme Court of Canada grants leave to appeal and hears the arguments.  How should they rule?  I could come up with 22 arguments to Sunday, but BASICALLY IN FAVOUR OF EMPLOYERS WHO HAVE VALID EMPLOYMENT AGREEMENTS!  It’s a no-brainer, particularly given the COVID-19 climate where employers are already strapped for cash.  Now, when faced with having to let go of an employee, an employer who doesn’t have extra funds is faced with an overly zealous employee litigation lawyer who wants to throw the Ontario Court of Appeal decision in Waksdale in their face and demand WAY MORE MONEY (we’re talking a difference of paying someone up to 8 weeks of salary to let them go vs. paying them up to 24-26 months to let them go!).

So how would the Supreme Court undo the Ontario Court of Appeal Decision?

First, the Supreme Court of Canada should recognize the sanctity of contracts: private parties want to determine their own rights, duties and obligations.  They hire professionals to draft clear, complete and meaningful terms.  Time and money is invested.  The last thing anyone wants is for a third-party arbiter to figure out what they intended if everything was good enough to begin with.  They may want a third party arbiter to ENFORCE the contract, but not re-write or tear apart the contract (which is what the Ontario Court of Appeal in Waksdale did).  Remember that the “Termination By Notice” provision that was used by the employer in this particular case was clear, certain, and complete enough to be enforceable.  And the agreement itself was never entered into improperly, so that would defeat any arguments to the contrary.  That’s what all the Courts below the Supreme Court have ruled (yes, even the Ontario Court of Appeal).  No one’s contesting these facts.  And they are the only facts that should count.

Second, the Supreme Court should tell lower courts to stick to the matter at hand and not go “above and beyond”  to create new laws that ruin a lot of lives and livelihoods.  In this case, the employee’s lawyer made up a crazy argument that some other termination clause in the employment agreement wasn’t kosher and therefore the termination clause that was actually used (the legal one, remember?) should fail.  The Supreme Court should say: thanks for addressing the issue, but you really should have agreed with the employer and said “IT’S IRRELEVANT SINCE WE DIDN’T USE IT!”

Guess what happens if someone who isn’t hurt bring a lawsuit based on a “theoretical future harm”?  The case typically gets thrown out.  Why?  Because that person hasn’t been harmed; there are no damages.  And it sets a very bad precedent if courts started awarding damages to parties that haven’t been harmed yet (maybe never).  Our courts are already clogged and bogged down with REAL cases; they don’t have time to consider fabricated ones.

But what did the Ontario Court of Appeal do in the Waksdale decision?  They entertained a theory: hmmm… even though the employer DIDN’T use this other termination clause, they certainly COULD HAVE and that COULD HAVE led to x, y and z.  And therefore… yada yada yada… the perfectly LEGAL termination provision that WAS USED is actually illegal and void now!  Just. Crazy.

Third, the Supreme Court should scold the Ontario Court of Appeal for going above and beyond what the parties actually contracted for.  They had in their contract a severability clause.  Which means that if a court found a provision to be illegal, it was to be severed from the rest of the agreement so that the rest of the agreement is left intact.  These types of severability clauses are found EVERYWHERE!!!!  And what did the Court of Appeal say when faced with this clause in this case?  Sorry… it doesn’t apply because the provision that no one relied upon is illegal.  That’s right: the clause was deemed to be illegal because it offended the Employment Standards Act, 2000 and because of that, it cannot be severed.  WHAT?  That’s the whole point of having a severability clause.  To keep the rest of the agreement in-tact when specific terms are found to be illegal!!!!  What the Ontario Court of Appeal did was disregard the clear terms of the contract and clear intentions of the parties at the time they entered into the agreement.  Completely unacceptable!

Finally, the Supreme Court should scold the Ontario Court of Appeal (apparently, the panel on the Court of Appeal who heard this case is known for tearing apart employment agreements in favour of employees – which is extremely unfortunate and should NOT be condoned) for not giving enough deference to the lower courts and for cherry picking precedents to support it’s crazy decision. A decision, mind you, that doesn’t help EMPLOYERS when they need it the most in this COVID-19 climate.  Remember: the lower courts found the termination clause that was relied upon LEGAL.

I’m not trying to politicize our courts; that’s what other countries do.  We have an independent judiciary (at least that’s what we publicly strive for).  What I’m hoping the Supreme Court of Canada does – through proper, defensible arguments in light of the current economic climate – is to protect employers because they need that protection more than ever right now.  I’m talking about employers – including dentist employers – who paid lawyers like us to introduce employment agreements with termination provisions that limit their liability.  Smart right?  But now, because of this 6.5 page decision from the Ontario Court of Appeal, practically all employers across Ontario are NOW facing huge lawsuits if they ever try to terminate a team member.  And remember: they don’t need a good reason – or any reason – to let someone go.

Things are tough all around.  The business needs to be restructured.  That’s basically it.  And some people will lose their positions and find new ones.  But now, with the Waksdale decision, employers will either: (1) be too scared to let someone go because of the debilitating cost consequences so they just won’t (that doesn’t help anyone really) or (2) let them go per the terms of the contract and hope that Waksdale doesn’t bite them later on, or (3) give the employee more than what the contract says but less than what Waksdale would demand in an effort to placate the employee so they don’t sue for more or (4) simply cave and give the employee the maximum amount required under the common law (typically: 1 month per year of service, up to a maximum of 24-26 months!!!).

But the Ontario Government Could Easily Undo Waksdale

In fact, irrespective of whether the Supreme Court of Canada hears the case (why leave it up to a bunch of unelected judges to determine the fate of every employer in Ontario?), the Ontario Government should pass laws that fix it.  Guess what?  The Ontario Government did so in the wake of COVID-19 when all the employees and their lawyers were claiming that employers weren’t allowed to temporarily lay-off employees unless they had their written consent – otherwise, it’s considered “constructive dismissal” and there may be damages owing under the Employment Standards Act, 2000.  Thankfully, the Ontario government came in and passed regulations that said: a reduction to hours / wages during COVID-19 do NOT count as a layoff or constructive dismissal.  Employers breathed a big sigh of relief because, prior to that, they were being harassed and threatened by employees and their lawyers demanding big payouts for having “constructively dismissed” them.  So the Ontario government could come in and easily undo the decision in Waksdale by permitting parties to indicate that “severability” or “saving” clauses in written employment agreements CAN be used to sever or save offending provisions in contracts to bring them into line with the Employment Standards Act, 2000.  If the Government REALLY wanted to go a step further, they could simply undo common law (judge made) damages (remember: 1 month per year of service up to 24-26 months max) and just have the Employment Standards Act 2000 govern (remember: 1 week per year of service up to 8 weeks max).  As my business partner often says: “Why should employers be the welfare state of the unemployed?  That’s what the government is for.”

Think About This

I’m sorry but employees and their lawyers SHOULD NOT be allowed to use that terrible Waksdale decision to attack employers and seek out tens or even hundreds of thousands of dollars in damages because their perfectly legal termination with notice provisions are struck down (due to the illogical reasoning in Waksdale).   Times are tough for employees.  I get it.  But they’re even tougher for employers, who took on a mountain of debt to get through COVID-19 shutdowns and lack of customers.  That’s the risk they took when they started up; there’s a reward to be had too.  But employees aren’t in the same boat.  They’ll look for another job.  But most have not taken on large business debts and owe huge sums of money every month to their commercial landlord.  Employers create jobs.  They need our support more than ever.  That’s why the Provincial government wants schools re-opened as quickly and as safely as possible: so employers can get back to business so employees can have and keep jobs!

If you’re an employer, you should be scared.  Scared enough into being mad.  And mad enough to do something about it.  Reach out to the ODA right now and tell them to lobby the Ontario government to change the regulations under the Employment Standards Act, 2000 so that Waksdale is rendered invalid AND have the ODA support the law firm that’s appealing to the Supreme Court so that they have everything in their power to convince the highest court of the land that the Ontario Court of Appeal got it wrong.

The window to act is small.  And it’s closing.  Do it now.