Termination Clause Shake-Up Here to Stay – Supreme Court Refuses to Hear Waksdale Appeal

In June of 2020, Ontario Court of Appeal in Waksdale v. Swegon North America Inc., 2020 ONCA 391 (“Waksdale”) created a seismic change in the law of termination clauses (an already tricky area of law for employers).

The Court of Appeal held that if a termination clause’s for-cause termination provision was not compliant with the Employment Standards Act, 2000 (the “ESA”), the entire termination clause (including the without cause provision) would be invalid, opening the door to expensive common-law reasonable notice of termination. Previously, it was not thought that one clause would affect the other’s enforceability.

This change had huge effects. Previously, many employers in Ontario had for-cause termination provisions that were technically non-compliant due to a quirk of the ESA. Under the ESA, an employee fired for cause may still be entitled to ESA benefits if they were not fired for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”. However, many employers instead simply stated that an employee is entitled to nothing on termination for cause, regardless of the reason. This was technically non-compliant with the ESA, but at the time did not matter because the effects of such a clause were limited. However, with the Waksdale ruling, this form of for-cause clause began endangering without cause termination clauses.

There was hope that the Waksdale decision might be overturned by the Supreme Court on appeal. However, the Supreme Court today refused to hear that appeal, meaning the Waksdale decision is here to stay.

Given this development, now is a good time to review your employment contracts with your legal counsel (if you have not already done so). There are ways that an employment contract can be changed to account for the new law and preserve the without cause termination provision. This will reduce your liability in the future if you must end the employment relationship.

PooranLaw will continue to monitor legal developments related to employment law and termination provisions. In the meantime, if you require legal assistance, we encourage you to reach out to your regular PooranLaw lawyer, or any member of our team.