Tuesday, 28 June 2016

The ONCA’s Decision in Oudin v. CFT Leaves One 'Wundering' – Is Wunderman Dead?

Must the termination provision in an employment contract expressly employ the words “benefits” in order to be legally binding? Before the Court of Appeal for Ontario’s decision in Oudin v. Centre Francophone de Toronto, 2016 ONCA 514 (released June 28, 2016), I would have said “yes.” In fact, I said so rather emphatically in my earlier blog post “Benefits”: The Most Important Word in Ontario Employment Law. I mean, I declared the word “benefits” as “the most important word in Ontario employment law.” Perhaps I was mistaken.

Facts

Oudin was a wrongful dismissal case resolved by way of a summary judgment motion heard by the Honourable Mr. Justice Sean F. Dunphy of the Ontario Superior Court of Justice.

At issue was the following termination provision, which was drafted in French:

…Le CFT peut également résilier la présente entente pour tout autre motif en donnant à l’employé(e) un préavis de quinze (15) jours ou le préavis minimum prescrit par la Loi sur les normes d’emploi, ou en lui versant une indemnité salariale égale au salaire qu’elle aurait droit de recevoir pendant la période de préavis…

On the motion, Justice Dunphy translated the provision before interpreting it. His Honour interpreted the provision comme ça:

The CFT may also terminate this agreement for any other reason by giving the employee 15 days notice or the minimum prescribed by the Employment Standards Act or by paying an amount of salary equal to the salary the employee would have had the right to receive during the notice period (after deduction and/or withholding at source), in the entire discretion of CFT.

On appeal, the Court of Appeal noted the error in translation, saying:

The motion judge translated the clause to read that the respondent could terminate the appellant on providing “the minimum” required by the ESA. The words “ou le préavis minimum prescrit par la Loi sur les normes d’emploi” should have been translated to “or the minimum notice required under the Employment Standards Act” and not “or the minimum prescribed by the Employment Standards Act.” The original agreement therefore provided that the respondent could terminate the appellant’s employment with ESA minimum notice and made no mention of severance.

If anything, this revised interpretation actually makes matters worse, but I am getting ahead of myself.

Commentary on the Decision of the Superior Court

I wrote the following in my commentary on the decision of the Superior Court:

Simply put I think Justice Dunphy, respectfully, got it wrong. I do not know what was argued in front of him, but from his commentary at paragraph 50 of his reasons for decision, I have to presume that plaintiff’s counsel tried to argue Wunderman. (Note that in Wunderman the contractual termination was sometimes offensive, but at other times not. The court in that case said if it had the potential to be offside, that it was; essentially what Justice Dunphy expressly rejected at paragraph 50.)

… in my personal opinion the word “benefits” must be used. Or, as was the case in Dimson, the word “payment” must not be used.

Benefits matter. Sometimes benefits can matter more to an employee than salary. In that respect and given the clarity of the Employment Standards Act, employment agreements ought to say “and benefits” to be enforceable. Hopefully the Court of Appeal will have the opportunity to weigh in on this issue soon, and in doing so end the debate by specifically referencing Wunderman, Stevens, and, should they be so inclined, this blog. (Ha! A man can dream.)

Decision of the Court of Appeal

Well, the Court of Appeal did not reference this blog in its reason for decision on the appeal of the Oudin case. Not that the same is not really surprising.

What is really frustrating, however, is that the Court of Appeal did not reference any of the earlier cases that seem to completely contradict what Justice Dunphy said in Oudin. In fact, the Court of Appeal’s decision is painfully laconic.

In its very brief written reasons, what the court said about the termination provision was this:

[7] The motion judge clearly understood that section 9.2 referred only to minimum notice. This is apparent form his conclusion at paragraph 56 where he stated that “the [respondent] agreed to provide only the notice period prescribed by the ESA”. The translation therefore did not factor into his analysis of the clause.

[8] The motion judge’s reasons make it clear that he understood and considered the appellant’s submission that - by referring only to “notice” - the clause ought to be interpreted as an attempt to contract out of all obligations under the ESA. The motion judge rejected this submission and found that there was no attempt to contract out of the ESA and that the parties had agreed that the ESA would be respected.

[9] The motion judge’s decision was based on his interpretation of a contract. He considered the circumstances of parties, the words of the agreement as a whole and the legal obligations between the parties. He concluded at paragraph 54:

Contracts are to be interpreted in their context and I can find no basis to interpret this employment agreement in a way that neither party reasonable expected it would be interpreted when they entered into it. There was no intent to contract out of the ESA in fact; to the contrary, the intent to apply the ESA is manifest.

[10] The motion judge’s interpretation of the contract is entitled to deference: see Sattva Capital Corp v. Creston Moly Corp, 2014 SCC 633 at para 52. As a result, we see no error in his conclusion that the clause is enforceable.

[11] The appeal is dismissed with costs of $10,000 inclusive of disbursements and taxes, payable to the respondent.

Commentary

Gah! What are we to do with that?! Perhaps that is not overly professional to say, but it is certainly the emotion that I find myself expressing.

If one looks at my earlier post, I track the history of the law on this point from the Supreme Court of Canada’s decision in Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986, 1992 CanLII 102 (SCC), through the numerous decisions of the Ontario Superior Court of Justice (Wright v. The Young and Rubicam Group of Companies (Wunderman), 2011 ONSC 4720 (CanLII), Stevens v. Sifton Properties Ltd., 2012 ONSC 5508 (CanLII), Paquette c. Quadraspec Inc., 2014 ONCS 2431 (CanLII), Carpenter v Brains II, Canada Inc., 2015 ONSC 6224 (CanLII)), and then finally a decision of the Ontario Divisional Court, Miller v A.B.M. Canada Inc., 2015 ONSC 1566 (CanLII), all of which would seem to suggest that the termination clause provided in the Oudin case should have been ruled dead on arrival.

The Court of Appeal for Ontario referenced none of those cases.

What does that mean? I don’t know.

One interpretation is that the Court of Appeal has now rejected that line of cases. But the fact that the court did not do so expressly, i.e. it did not say, ‘the appellant submits that Wunderman requires this interpretation and we reject it’, will lead others to the conclusion that nothing can be read into this decision other than the court showed deference to the motions judge.

Frankly, and again very respectfully, I do not believe that this was a case where deference ought to have been shown. As I mentioned in my earlier post, Justice Dunphy “went out of his way to cure an offending termination provision. The same seems contrary to not only what Justice Low had said in Wunderman: “There is, in my view, no particular difficulty in fashioning a termination clause that does not violate either the minimum standards imposed by the Employment Standards Act…”, it also seems contrary to the approach taken by the Supreme Court of Canada in Shafron v. KRG Insurance Brokers (Western) Inc., [2009] 1 SCR 157, 2009 SCC 6 (CanLII), in which the Court said that it has no interest in trying to fix poorly drafted contractual provisions.”

I really do wish the Court of Appeal had said more definitively what it thought of the arguments that I am sure where made to it.

Takeaways for Employees with Labour Pains

Where does this case leave employees? I still do not really know. So I will revert to what I said when Justice Dunphy released his decision, “the law is nowhere near as clear as we wish it would be on this point.”

If you have an employment agreement that purports to limit the amount of notice and/or severance to which you may be entitled on the termination of your employment, speak with an experienced employment lawyer. In almost all cases, it will be financially worth it and peace of mind is always worth something.

If you are an individual looking for assistance with respect to the interpretation or enforceability of the terms of your employment contract, contact the professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP; we would be happy to be of service to you.

Takeaways for Employers with Labour Pains

The takeaway for employers is have your employment agreement drafted by a professional. Notwithstanding Justice Low’s comments, demonstrably employment agreements are difficult to draft properly and getting it wrong is quite costly.

If you are an employer and you need a written employment agreement, the professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

8 comments:

  1. I'm not sure I take these decisions as conflicting with Wunderman: It appears to me from Justice Dunphy's reasons that the ESA arguments put to him were along the lines that the 'just cause' style language was overbroad and non-ESA compliant, which taints the rest of the termination language. This is an argument I've heard discussed theoretically before (I think Kumail Karimjee gave a presentation about it at some point), but the question of 'severability' is one that would certainly depend on the construction of the contract. Also, plaintiff's counsel argued on the basis of the ambiguity of '15 days or the ESA minimums'.

    Either one of those seems like a passable argument, but not nearly as strong as what you've pointed out, that it appears to limit entitlements to pay in lieu of statutory notice to 'salary', which appears to me to exclude benefits - not to mention other elements of the remuneration package, such as commissions. I wouldn't even look at it as a Wunderman question. It's a good old-fashioned Machtinger issue.

    So I agree with you about the problems in the language, but, unless I'm missing something (which is possible; I haven't read these decisions all that closely yet), it just doesn't look to me like either court addressed this particular question at all.

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    1. Dennis:

      I always appreciate your comments.

      Have a look at the motion decision. Moreover, consider what the ONCA said about the provision itself, it expressly omitted the payment of severance and demonstrably did not say "benefits."

      The motions judge appears to turn his mind to the arguments advanced in Stevens and Wunderman, and implicitly rejects them.

      Wunderman et al, are simply outcroppings of Machtinger (if a contract does not comply with the ESA, then it's void ab initio), so I am somewhat surprised that the ONCA would allow the ruling to stand without at least commenting on the benefits issue - or at the very least the severance issue as they mention the word.

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    2. The omission of severance may be less troubling. On the framing of the language - creating an entitlement to terminate on x notice - it appears to me to be silent as to severance entitlements. And in the absence of additional limiting language, I don't see any reason to think that the contract is trying to displace the severance provisions of the Act - I've effectively terminated the contract by providing you with x notice, and now I also have to pay you severance. (Not sure that's how the motions judge actually *read* the provision, but I'm pretty sure I've seen cases taking that approach to such language before. I'd have to check my case law indices for citations, though.)

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  2. I'm not so sure. The Court didn't rule on the issue one way or another, but just said that the trial judge's decision was entitled to deference. I think this decision has little value as precedent because it is so specific to the trial judge's findings.

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  3. Sean and Dennis:

    Great to hear the thoughts of two of my favourite contemporaries. Hope you both are well.

    I have always been troubled by the seeming expansion of Stevens. My initial reading of that case made some sense to me- the problem was not that the employer left out a reference to benefits. The problem was that the employer placed a limit on entitlements and then said, effectively, "and that's it- you get NOTHING else." [my paraphrase, my emphasis]

    Such a limitation is clearly contrary to the ESA on its face.

    I have been troubled to see the courts wade in and knock out contracts that have notice limits and simply don't MENTION other things like benefits, severance, or accrued vacation/wages. This always seemed to me like it was going one step beyond what the courts are supposed to be doing: interpreting contracts in accordance with the parties' intentions.

    Frankly, now that we are in the age where the courts must assume a duty of good faith in bargaining, I would think that this strengthens the notion that any ambiguity should be resolved in favour of an interpretation that is in accordance with the law (i.e., in good faith), rather than one that is contrary to it.

    Where one party has drafted a contract- the terms of which are in clear breach of a statute- by all means, the court should drive a truck through the offending provision. Where, however, there is a contract which is silent on a particular point, and the interpretation of that point can either mean that the contract complies with the law or not, I think it is going too far for the courts to say that it should be struck out as void- at least not without some parol evidence that the parties actually intended the illegal interpretation.

    Silence should not be a shortcut to conclusion of illegality without something more.

    My own two cents, and worth both (now extinct) pennies.

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    1. Such was the approach in Roden v The Toronto Humane Society (2005 ONCA)

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  4. ...and the Supreme Court has the last word. Leave to appeal Oudin has been denied.

    I guess we all get to wait for some further clarification from the bench, although I suspect that the answer will end up being some version of "silence as to the 'other' ESA entitlements is fine, express denial of them is not."

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    1. Hopefully Wood v Fred Deeley Imports Ltd. will deal with it. Facta and my summary here: http://bit.ly/2cQKRQ1

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