Rudner Law, Employment / HR Law & Mediation
The recent Court decision in Wilds v. 1959612 Ontario Inc. addresses the enforceability of a termination clause contained in the employment contract, as well as the availability of punitive damages. The Court ruled in favour of the employee on both issues, which should serve as a reminder to employers about the potential liabilities they could face in a wrongful dismissal lawsuit.
The plaintiff Barbara Wilds was employed by the defendant Gibson for approximately 4 1/2 months as an executive assistant. She was 52 years old at the time of termination.
Despite being entitled to one week of notice or termination pay pursuant to the Employment Standards Act, 2000 (the “ESA”), Gibson did not pay Ms. Wilds any amounts upon her termination. She commenced a lawsuit for wrongful dismissal in 2021, and brought a motion for summary judgment returnable November 17, 2023. Among the issues determined in the motion for summary judgment were:
A properly drafted termination clause in an employment contract can displace the employee’s entitlement to reasonable notice pursuant to common law. However, where a termination clause is found to violate the ESA, it will be unenforceable.
In recent years, the law on termination clauses has seen substantial movement towards the side of employees, with many termination clauses being found to be unenforceable. When a termination clause in an employment contract is unenforceable, the employee will be entitled to reasonable notice of termination pursuant to common law, rather than being limited to the entitlements specified in the contract.
In the Wilds case, the employee was subject to both a “termination without cause” provision and a “termination with cause” provision, both of which were found to be unenforceable by the Court. The Court’s reasons included the following:
Consistent with previous cases, the Court found that a “saving provision” in the contract did not prevent the termination clause from being unenforceable. The saving provision stated the following:
“It is intended that this termination provision includes any entitlements you have pursuant to the Act. In the event that your entitlements pursuant to the Act exceed these contractual provisions, those statutory provisions shall replace these contractual provisions and no further payments are required.”
Accordingly, the Court found that Ms. Wilds was entitled to a reasonable notice period of two months pursuant to common law, and was entitled to her full compensation package during that period, including her benefits and bonus.
Punitive damages are available to the Court to punish a defendant for reprehensible conduct. Doing so is the exception rather than the rule, and will only be done where the following requirements are met:
The Court found that the employer’s conduct justified an award of punitive damages, citing the following:
In the circumstances, the Court awarded Ms. Wilds punitive damages in the amount of $10,000.00, in addition to her damages for wrongful dismissal.
This case should serve as a reminder to employers of the potential liabilities they face when dismissing employees.
Employers should not assume that an employee’s damages will be limited by the terms of their employment contract, or that the employee will only be entitled to payment in lieu of reasonable notice. Courts may find termination provisions in employment contracts to be unenforceable, and may award punitive damages or other heads of damages where there is a finding that the employer acted in bad faith.
Employees can be dismissed for cause, and therefore without notice or severance, when their misconduct or performance is so egregious that the employment relationship has been irreparably harmed. In assessing this issue, employers must adopt a contextual approach, which considers not only the misconduct in question, but the entirety of the employment relationship.
Rudner Law, Employment / HR Law & Mediation
I’ve discussed the Privacy by Design principle before, in the Inside Internal Control newsletter. In case you don’t know, PbD is an approach developed by Dr. Ann Cavoukian, the Privacy Commissioner of Ontario, which proactively embeds privacy protection by default in the design of an organization’s practices and products.
Colin Braithwaite
This year’s Ontario Employment Law Conference co-sponsored by First Reference and Stringer Brisbin Humphrey on June 2, 2010, will touch on several topics of importance to employers. The first topic on the Agenda will provide employers with guidance on a significant court decision and changes in court procedures affecting the termination process. Specifically it should help employers minimize claims arising from the termination process.
Marie-Yosie Saint-Cyr, LL.B. Managing Editor