Friday, 6 April 2012

Is Two Weeks Too Little?

Can an Ontario employment contract legally provide that an employer may terminate an employee’s employment without cause provided that the employer provides two weeks pay in lieu of notice.

The legal question is: could the employer enforce this provision to only provide the employee with two weeks pay in lieu of notice?

The short answer is probably not, but like most everything in law, the real answer is, “it depends.”

The first variable that has to be considered is the term of employment the employee has entered into.  If the contract specifies that the contract is for a fixed length of time, i.e. the contract provides an end date for employment, then the situation will vary depending upon the length of the contract.  However, most employees are hired for what employment lawyers call “an indefinite term,” meaning that the employee expects to work for his or her employer for as long as both sides remain happy and work exists.

In cases of indefinite hire, clauses such as the one mentioned above (‘the employer may terminate without cause on the provision of two weeks pay in lieu of notice’) are typically not enforceable.

The reason such provisions are not enforceable by the employer is because they may potentially violate the statutory provisions of Ontario’s Employment Standards Act, 2000 (the “ESA”.)

The ESA provides, basically, that an employer must provide at least one week’s notice of termination for every completed year of employment. So, if someone has worked for three years and then is terminated the question becomes which would prevail: the contract, which says two weeks, or the ESA that says three weeks?

The law says that the ESA would prevail.  The Supreme Court of Canada weighed in on the issue in the case of Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986.

In Matchinger the Supreme Court observed that where an employment contract fails to comply with the minimum notice periods set out in provincial employment standards legislation, such as the ESA, the employee can only be dismissed without cause if he or she is given reasonable notice of termination. (For a discussion of what reasonable notice is, see What is Wrongful Dismissal?) Which is to say, the contractual provision providing two weeks notice was deemed of no force or effect.

It is important to note that the contract need not be ‘wrong’ at the time of termination. If the agreement provides that the employer will provide two weeks pay in lieu of notice and the employee has only been employed for one year that does not make the provision any more legitimate, because the clause had the potential to be wrong, because the employee could have worked for the employer for a longer period.


What does this mean for employees?

If an employee with such a provision within his or her employment agreement is terminated from employment and is only provided with two weeks pay in lieu of notice, ostensibly in accordance with the provisions of the employment contract, the employee would be very prudent to seek legal advice.

In Machtinger, Mr. Machtinger had been employed for roughly 7.5 years.  His agreement provided that he could be terminated on the provision of two weeks pay in lieu of notice.  The court found that the agreement was flawed from the start, of no force and effect, and he was awarded seven months pay.

As always, everyone’s situation is different.  The above is not intended to be legal advice for any particular situation and it is always prudent to seek professional legal advice before taking any decisions on one’s own case.

Sean Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer. He tweets from @SeanBawden.

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