Employers: Waksdale is here to stay! It’s time to review your employment contracts!

The Supreme Court of Canada dismisses the leave to appeal in Waksdale affirming the Ontario Court of Appeal’s significant judgment on the enforceability of termination provisions.

On January 14, 2021, the Supreme Court of Canada (“SCC”) dismissed the application for leave to appeal from the judgment of the Ontario Court of Appeal in Swegon North America Inc. v. Waksdale, 2020 ONCA 391 (“Waksdale”).

As a refresher, the Ontario Court of Appeal in Waksdale ruled on June 17, 2020 that termination provisions in employment contracts are to be read as a whole. If any part of the provision is found to represent a contravention of the Employment Standards Act (“ESA”) the entire provision will be deemed invalid. The Court in Waksdale further clarified that an invalid termination provision will not be rescued by the severability clause commonly found in employment contracts.

For instance, in Waksdale the “without cause” provision under scrutiny was held to be unenforceable on the basis of an invalidly drafted “with cause” provision that violated the ESA. Specifically, the contract provided for a definition of “just cause” broader than the definition under the ESA (wilful misconduct, disobedience and wilful neglect of duty). The “with cause” provision was not saved on the basis of severability, which rendered the entire termination provision invalid. This left the employer exposed to a significant and unexpected severance liability under our common law..

We previously provided a comprehensive breakdown of the Waksdale decision and strategies for drafting employment contracts moving forward. That newsletter can be found here: https://loud-clear.createsend.com/campaigns/reports/viewCampaign.aspx?d=t&c=D4BA69FBAC7CF904&ID=6A996909EEE443D42540EF23F30FEDED&temp=False&tx=0&source=Report 

Employer Takeaway

The significant impacts of Waksdale on Canadian employment law and specifically on the enforceability of termination clauses in employment contracts cannot be understated. The SCC’s affirmation of this judgment means that employers will want to judiciously review their standing employment contracts with employment law counsel in order to ensure that the termination provisions are validly drafted in accordance with the ESA and consistent with the Waksdale judgment.

We recommend that you seek the advice of your employment law counsel in order to ensure these matters are properly addressed moving forward. The members of the Employment Law Group at Sullivan Mahoney LLP are available to provide you with that advice and assistance.

Disclaimer: Information made available in this article is provided for general information purposes only and is provided without representation for its accuracy or completeness. It is not legal advice and should not be relied upon. You should not take any action or fail to take any action based on the information set out in this article or on this website.  Consult a lawyer at Sullivan Mahoney LLP and seek professional legal advice tailored to your unique situation.