Sunday, 3 November 2013

ONCA Upholds 15-Day Termination Provision - Important Lessons for the Suddenly Unemployed

In a decision that still leaves this employment lawyer scratching his head, the Ontario Court of Appeal upheld a decision of the Ontario Superior Court of Justice that a termination provision that permitted an employment agreement to be terminated on just 15 days' notice was valid and enforceable.

In its appeal book endorsement in Musoni v. Logitek Technology Ltd., 2013 ONCA 622, the Court of Appeal held:
The employment contract between the appellant and the respondent was clear in providing for 15 days’ notice in order to terminate. The appellant was given pay in lieu of notice with accordance with the agreement, as found by Morgan J. We see no error in Morgan J.’s conclusions. The appeal is therefore dismissed with costs fixed at $3,500 inclusive of disbursements and HST.
The above was the entirety of the Court of Appeal's decision. Such a short decision left this author wondering what more could be gleaned from the trial decision. A review of that decision left this author upset that the plaintiff employee had not sought (or followed) professional legal advice.

What Happened in Musoni v. Logitek Technology Ltd., 2012 ONSC 6782

Musoni v. Logitek Technology Ltd., 2012 ONSC 6782 was a wrongful dismissal case. In that case the plaintiff employee had sought $70,000 in wrongful dismissal damages following the termination of his employment. The Defendant took the position that he had been paid in accordance with the terms of his employment agreement and that accordingly nothing more was due and owing to him.

The terms of the plaintiff's employment agreement read as follows:
QLOGITEK [i.e. the Defendant] or EMPLOYEE [i.e. the Plaintiff] shall have the right, to terminate this employment agreement by notice in writing. A fifteen (15) days notice period will be required by the appropriate party, if agreement is terminated.
Nothing further appears to have been provided by way of a severance provision.

According to the facts, as found by the trial judge, the plaintiff was hired as a bilingual customer support agent in October, 2005. The parties signed an Employment Agreement on April 17, 2006. It is unclear when the plaintiff actually commenced employment (October 2005 or April 2006.) The Plaintiff’s employment was terminated, without cause, by written notice on March 6, 2008. That notice was accompanied by a cheque payable to the plaintiff in the amount of $1,804.38, which was described in the notice as “a final settlement and which includes 2 weeks notice pay.”

As found by the trial judge, "The written notice, together with two weeks’ pay, complied with the Defendant’s requirements under sections 54 and 57 of the Employment Standards Act, S.O. 2000, c. 41."

In what is perhaps the most telling part of the decision, the Honourable Mr. Justice Edward Morgan noted in his reasons for decision that:
[6] The Plaintiff concedes that the 15 days’ notice period required under the Employment Agreement is equal to half a month’s pay, and that the amount of $1,804.38 is the correct amount for half a month’s pay. He acknowledged at trial that he deposited the cheque and that the terms of the Employment Agreement were thereby fulfilled.
[7] Plaintiff does not, therefore, claim that he was owed more money under the Employment Agreement. Rather, his claim is based on other alleged wrongdoing by the Defendant, some of which occurred at the commencement of his employment, some of which occurred during the course of his employment, and some of which he only learned of subsequent to his termination. His overarching argument is that although the Defendant purported to terminate him without cause, the Defendant actually intended to fire him for cause.
After hearing the plaintiff's version of events, Justice Morgan held that:
[14] The Plaintiff may have valid observations about his treatment by the Defendant. It is apparent that he genuinely feels that he was mistreated. However, from an employment law point of view none of these complaints have any cogency. Much as the Defendant may have wanted to dismiss him with cause, the Plaintiff was dismissed without cause and was paid what was owed to him for that dismissal.
[15] Had the Plaintiff been rightly dismissed with cause, there would have been no pay in lieu of notice owing to him. Had he been wrongfully dismissed – i.e. without notice or cause for dismissal – he would have been owed pay in lieu of notice as provided for in the Employment Agreement and in the Employment Standards Act. Either way, he would not have done better than what he actually received from the Defendant – pay in lieu of notice precisely as stipulated in the Employment Agreement and in the legislation.
[16] Accordingly, none of the Plaintiff’s allegations against the Defendant provide a legal footing on which he can base his claim to damages. The action is therefore dismissed, with costs to the Defendant on a partial indemnity basis.


As short as the decision in Musoni is, it raises two important issues about employment law in Ontario: (1) Ontario courts are not generally not interested in the reason for termination nor in the treatment an employee received while in employment; and (2) it can really, really pay to seek an opinion on the legal validity of an employment agreement.

Turning first to the issue of the plaintiff's allegations about the improper reason for his termination, it is clear from Justice Morgan's decision that the plaintiff spend a good deal of his time explaining why he should not have been fired. Essentially, as I read the decision, the plaintiff took the position that the employer did not have a good enough reason to fire him and, therefore, I have to presume, the plaintiff took the position that he should not have been fired at all.

As is explained in this blog's overview of wrongful dismissal, What is Wrongful Dismissal?:
Firing an employee without any ‘good reason’ is not “wrongful dismissal” under Ontario employment law. Employers are generally permitted to fire employees at any time during the employment relationship, subject only to the requirement to provide “reasonable notice.”
As I often to explain to clients and others, an employer can terminate an employee because the employer does not like the employee's shoes; meaning that the employer does not require any reason to terminate employment. If the employer wishes to end the relationship, then provided that the reason that the employer wishes to do so is not illegal, the employer may do so, provided only that proper notice and severance are provided.

Thus, as Justice Morgan observed, and as the plaintiff was informed, none of his complaints were relevant to the case of his dismissal.

The second issue, and the issue with which this author, as an employment lawyer, has greater concern is the court's observation that nothing more was due to the dismissed employee for notice, given the terms of the Employment Standards Act and his employment agreement.

In this author's opinion, that decision was incorrect. However, given that the plaintiff did not argue that he was entitled to more severance (in fact, it would appear that he conceded that he was not owed more given the terms of his employment agreement) there was likely nothing the judge could do.

As is explained more fully in both the overview to wrongful dismissal and in this blog's post Poorly Drafted Employment Agreement Proves Costly, the terms of the agreement used by the defendant in this case were clearly illegal. Fifteen days notice would not be legally compliant with the Ontario Employment Standards Act, 2000 once the plaintiff had been employed for more than three years. Accordingly, based on the decision in The Young and Rubicam Group of Companies (Wunderman), 2011 ONSC 4720 (CanLII), the termination provision should have been struck down as "void ab initio" (void from the beginning.)

This author would suggest that had the plaintiff argued that the termination provision in his employment agreement was unenforceable and that he was therefore entitled to notice of termination in accordance with the common law, the court would have agreed. Although a complete summary of the facts is not provided, given the plaintiff's two years of experience, it would not be unreasonable to speculate that he may have been awarded two or three months of salary - not 15 days.

Takeaways for Employees

There are two important takeaways for employees from these decisions.

The first important takeaway is that as much as one may want it to be relevant, generally, unless an employer outright lies about the reason for termination or terminates an employee's employment for an illegal reason (and there are only a handful of illegal reasons,) the reason for termination is not relevant in a wrongful dismissal suit. As I've said before, "one does not get money simply because his employment was terminated without any good reason."

The second important takeaway is that simply because one has signed an employment agreement with a termination provision, that does not necessarily mean that the amount set out in the agreement is the extent of the employee's entitlements on termination. A lot of termination provisions are not legally enforceable; meaning that a lot of employees are actually owed a great deal more than they may believe.

Therefore, the most important takeaway from this case should be: if you are an Ontario worker, and you find yourself suddenly unemployed it is generally prudent to seek professional legal advice before taking any decisions about your case. The professional, experienced employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you. To contact the author of this blog, Sean Bawden, email or call 613-238-6321. 

Takeaways for Employers

While the employer in this case succeeded in paying only 15 days pay in lieu of notice, and had both the Superior Court of Justice and the Ontario Court of Appeal affirm that the same was fair and reasonable, employers should not read this case as saying that such a termination provision is valid, legal language.

Drafting employment agreements is tricky, especially with respect to termination provisions. A reading of the aforementioned Wunderman decision is especially telling on this point. If you are an Ontario employer, the professional, experienced employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization. To contact the author of this blog, Sean Bawden, email or call 613-238-6321.

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, publisher of the law blog for the suddenly unemployed, can be reached by email at or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP, and part-time professor at Algonquin College teaching Trial Advocacy for Paralegals. He is a trustee of the County of Carleton Law Association for 2013.

No comments:

Post a Comment