Ontario Court of Appeal rules “saving clause” in employment agreement unenforceable
Asha, January 13, 2020
It is common for employment contracts to contain a “saving provision” which states that an employee will receive their Employment Standards Act, 2000 (“ESA”) minimums under all circumstances. Provisions such as these attempts to “save” an employment contract from being deemed unenforceable under the ESA. In a recent Ontario Court of Appeal decision, the court found that saving provisions such as these will not necessarily cure other provisions that are deemed unenforceable in an employment contract.
In Rossman v. Canadian Solar Solutions, Rossman’s employment contract had a clause that stated, “benefits will cease 4 weeks from the written notice”, which could violate the ESA if Rossman worked long enough to be entitled to more than four weeks’ notice.
The employer argued that the potential violation of the ESA was remedied by a saving provision in the contract which stated:
In the event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under this agreement. The Employee agrees to accept the notice or pay in lieu of notice as set out in this paragraph as full and final settlement of all amounts owing by the Employer on termination, including any payment in lieu of notice of termination, entitlement of the Employee under any applicable statute and any rights which the Employee may have at common law, and the Employee thereby waives any claim to any other payment or benefits from the Employer. Benefits shall cease 4 weeks from the written notice.
The Court found that the saving provision could not remedy the language pertaining to when benefits will be ceased for the following reasons:
- The language of the contract was ambiguous because it was unclear whether the saving provision also applied to the limitation on benefits, since that language was placed after the reference to the section of the paragraph that said it was a “full and final settlement of all amounts owed”.
- Saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards.
- The Court was concerned with employers who might to take advantage of the unequal bargaining power in contract negotiations and try to slip in illegal provisions include illegal clauses knowing that most employees would not challenge them.
There are a couple of takeaways from this case:
- it may be easier to enforce a termination provision that provides more than ESA notice;
- if you want to limit notice to the ESA, make sure you obtain legal advice; and
- update your agreements regularly because the law in this area changes frequently.