Thursday 16 September 2021

Hope for Ontario's Employer Bar: The ONSC's Decision in Rahman v. Cannon Design Architecture Inc.

Are these words automatically fatal to a contractual termination provision post the Court of Appeal’s decision in Waksdale v. Swegon North America Inc.: “[The Employer] maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.”

While many in Ontario’s employment law bar (especially those predominantly acting for plaintiffs) would respond with an emphatic “of course!” In Rahman v. Cannon Design Architecture Inc., 2021 ONSC 5961, Justice Sean F. Dunphy of the Ontario Superior Court held otherwise.


The plaintiff in this case, Ms. Rahman was employed by the defendant, Cannon Design Architecture Inc. as a “Principal.” She commenced on February 16, 2016, pursuant to a written employment agreement. Her base salary in her last year of employment was $185,000 plus benefits and eligibility in a discretionary bonus plan allocated at year end and 75% of which was paid in deferred share units themselves vesting over a period of years.

As found by Justice Dunphy, Ms. Rahman’s hiring was preceded by a period of interviewing and negotiations. After a number of interviews, a written first offer letter dated February 3, 2016 was sent to the plaintiff from Cannon Design and attaching a separate more general “Officer’s Agreement” that would form a part of the proposed terms of hiring. The Officer’s Agreement dated September 21, 2015 was the more general policy document while the offer letter was specific to the plaintiff. The offer letter provided that in the event of any conflict between the Officer’s Agreement and the offer letter, the offer letter would govern.

The offer letter itself provided for payments not less than the “advance notice and/or applicable payments, benefits continuation, and severance pay if applicable, equivalent to the minimum applicable entitlements contained within the Ontario Employment Standards Act, 2000, as amended, or any applicable successor legislation”. This latter point is repeated in the next sentence in the offer letter which provides “[f]or greater certainty, CannonDesign's maximum liability to you for common law notice, termination pay, benefits continuation, severance pay, or payment in lieu of notice shall be limited to the greater of the notice required in your Officer's Agreement or the minimum amounts specified in the ESA”.

Ms. Rahman was urged to seek independent legal advice to consider the terms of the offer of employment made to her and she followed that advice (more on that below.) The legal advice she received focused particularly upon the termination provisions in the offer letter and clearly underlined the contrast between the mandatory minimum provisions of the ESA which cannot be waived, the more generous implied terms under the common law and placed the proposed terms of employment offered to Ms. Rahmen in this context.

Specifically, as originally drafted, the Officer’s Agreement provided for one month’s working notice with an enhanced notice period applying only after five years of employment and subject to certain conditions including the provision of a release. Ms. Rahman’s lawyer’s letter noted that the enhanced benefit only applied after five years, was ambiguous as to whether working notice was intended in that case and contained ambiguous restrictions regarding applying for reemployment elsewhere. Alternative language was suggested to deal with these concerns, proposing notice of one month per year of service in exchange for a full release in the event of termination by the company for any reason at any time and clarifying the reemployment restrictions.

Cannon Design did amend the offer letter to include an enhanced benefit of two months’ notice in the event of termination by the company within the first five years conditional upon receipt of a release. The changes were not all that Ms. Rahman requested, but they did represent a material improvement to the terms of the initial offer and, potentially, a benefit significantly beyond the minimum notice provisions of the ESA.

Upon receipt of the revised proposed language, Ms. Rahman thanked Cannon Design for the changes and attended the office the following day to execute the required documents.

Ms Rahman’s employment was subsequently terminated without cause on April 30, 2020.

Ms Rahman sued her employer and brought a contested motion for summary judgment. On the motion, Ms. Rahman advanced the position that the termination provisions of her written employment agreement are void because they allegedly violate the minimum standards of the Employment Standards Act, 2000. The alleged violations of the ESA arise from (i) a “just cause” termination provision that allegedly permits termination without notice in circumstances beyond those permitted by the ESA; (ii) the notice provisions purport to pay base salary only during the notice period; (iii) lack of severance pay in the Officer’s Agreement; (iv) insufficient notice provisions in future; and (v) stripping of bonus entitlement even if fully earned.

The plaintiff’s position was that the language governing termination of employment for cause violates the ESA by reason of the potential to interpret such provision so as to permit termination without notice in situations where the ESA would not authorize it. The relevant provision of the offer letter reads as follows:

CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.

Decision of the Ontario Superior Court

In dismissing the plaintiff’s argument that the termination provision of the impugned employment agreement was entirely unenforceable because the “just cause” termination provision would allegedly permit termination without notice in circumstances broader than those contemplated by the ESA, (i.e. the “Waksdale argument”) Justice Dunphy provided the following reasons for his decision:

[24] The plaintiff urges me to conclude that the termination provision of this employment agreement is entirely unenforceable because the “just cause” termination provision would allegedly permit termination without notice in circumstances broader than those contemplated by the ESA: Waksdale v. Swegon North America Inc., 2020 ONCA 391 (CanLII). The plaintiff also noted that the same phrase “conduct that constitutes just cause for summary dismissal” contained in this employment agreement was also considered in Ojo v Crystal Claire Cosmetics Inc., 2021 ONSC 1428 (CanLII) and declared to be an invalid attempt to contract out of the ESA in that case.

[25] I cannot agree that Ojo represents a conclusive and binding determination that the general phrase “conduct that constitutes just cause for summary dismissal” must in every contract and in every context be construed as authorizing dismissal in circumstances that would contravene the ESA and the regulations thereunder.

[26] There is no basis to apply a strict or even adverse construction approach to the termination provisions of this employment contract in the context of this case where:

a. the termination provisions were the object of specific negotiation with the benefit of time and independent legal advice between reasonably sophisticated parties with neither compulsion nor marked disparity in bargaining power;

b. the negotiations resulted in material improvements for the benefit of the prospective employee in excess of ESA minima; and

c. the offer letter contains an explicit “for greater certainty clause” recognizing that the employer’s “maximum liability … for common law notice, termination pay, benefits continuation, severance pay, or payment in lieu of notice” shall be limited to the greater of the notice required in the Officer’s Agreement or the minimum amounts specified in the ESA.

[27] The mutual intent to comply with the minimum standards of the ESA is clear in this case. As Iacobucci J. observed in Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986 (at para. 35):

[a]bsent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the Act or otherwise take into account later changes to the Act or to the employees' notice entitlement under the Act. Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice.

[28] The twice-repeated language of this contract quite explicitly follows the standard suggested by Machtinger and referentially incorporates the ESA minimum standards. It is not necessary to enumerate them exhaustively in the contract, particularly when they are subject to periodic change. Every contract – including this one – must be interpreted with a view to giving expression to the mutual intention of the parties as expressed in the words used by them. That intent is inferred from an examination of the surrounding circumstances. Conclusions reached in another case – particularly one such as Ojo post-dating this contract – are of limited assistance in construing the intention of these parties to this agreement in this context.

[29] There is no basis in this case to imply into the general phrase “just cause for summary dismissal” a standard below the ESA standard of wilful misconduct absent any evidence that such represents a reasonable construction of the intention of the parties in the context of the employment agreement in question. There is no evidence of any policy or practice of Cannon Design authorizing summary dismissal of employees for cause in circumstances beyond the limited circumstances enumerated in the ESA and its regulations. The Oosterbosch v. FAG Aerospace Inc., 2011 ONSC 1538 (CanLII) case relied upon in Ojo made no generalized findings regarding “just cause for summary dismissal”. Oosterbosch considered a specific set of written employment policies that clearly did authorize dismissal in circumstances beyond the “wilful” standard required by the ESA.

[30] There is no basis for me to infer in this contract an intention to characterize non-wilful misconduct as amounting to “just cause for summary dismissal” and I cannot in fairness do so. If none of the parties to the contract at its inception – having turned their minds to the very subject of ESA minimum standards applicable on termination and their priority – took objection to the general “just cause for summary dismissal” language used it would be entirely illogical to infer nevertheless an intent to contract out of well-known and long-standing minimum standards in the jurisdiction in which they were operating. The language employed in no way requires such an illogical interpretation and there is no evidence of an existing non-conforming policy.

[31] The offer letter, properly and fairly construed in its true context, does not violate the minimum standards of the ESA in the case of “just cause for summary dismissal”. The ESA mandates no such result nor does a fair and reasonable construction of the agreement.

[35] The defendants fairly point out that the construction of the law contended for by the plaintiff here, if carried to its logical conclusion, could result in employers seeking to deprive employees of bargained-for severance benefits that exceed the common law standard.

[36] If the contractual termination provisions are void, they must be void for all purposes and not merely at the election of one side or the other. Is a CEO with a rich and closely-negotiated severance package to be deprived of it because the employer can point to an alleged ambiguity in the “just cause” termination clause after the fact?

[37] Uncertainty in the application of the law to fairly negotiated employment agreements will only have the unintended consequence of causing employers to forego efforts to offer severance benefits beyond the ESA minima for fear that any steps beyond the limited bounds of the ESA will carry an unacceptable level of risk of being found invalid with the resulting potential for common law liability far in excess of what either side expected at the time the contract was agreed to. Doubtless this is already occurring to some degree. Over time, there are no winners in such a world.

Justice Dunphy then went on to note that there was a second reason why the termination provision “must” be upheld:

[32] Section 5(1) of the ESA provides that any attempt to contract out of or waive an employment standard is void. However, this provision is made “subject to subsection (2)” which provides as follows:

5(2) If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply.

[33] The employment contract in this case provides a benefit clearly in excess of the relevant employment standard. In the event of termination without cause within the first five years, the employee is entitled to a second month of pay. The entitlement is not unconditional – the employee must agree to provide a release among other things. There is no question of compulsion – the employee may elect to receive the second month or (as happened here) may decline to provide the required release defaulting to the ESA minimum amounts.

[34] Although optional, this is a benefit the employee is entitled to receive if the employee agrees to comply with the applicable conditions and it is a benefit significantly in excess of the ESA minimum standard applicable to an employee let go with less than five years’ service. The employer has no discretion.

It is clear from the court’s reasons, that Justice Dunphy placed considerable weight on the fact that Ms. Rahman had received legal advice about the termination provision and had, in fact negotiated a better deal. In addition to what he wrote at paragraph 26 of his reasons for decision, Justice Dunphy also said the following:

[19] There can be no suggestion that Ms. Rahman was not adequately informed of both the nature of the statutory and common law rights that were the subject of the negotiations and the impact of the contract proposed by the employer on those rights. It is clear that Ms, Rahman sought and received legal advice about her rights at common law and under the ESA in relation to the possible future termination of her employment. It is clear that she knew or ought to have known of the binding nature of the minimum standards in the ESA which cannot be reduced or waived by contract and that she understood that the common law standards in relation to termination of employment are potentially much more generous than both the ESA minimum standards and the termination benefits proposed in the offer letter. She was being hired into a reasonably senior role at a significant salary and was a woman of experience and sophistication. Her situation on reviewing and signing the employment agreement was poles apart from the situation that more commonly obtains in circumstances described by the Court of Appeal in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 at para. 28.

Finally, in addition to the court’s reliance on the fact that Ms. Rahman had obtained legal advice before negotiating and signing the agreement, Justice Dunphy also placed reliance on the “saving provision” contained within the offer letter, writing:

[13] The offer letter thus provides in clear and unambiguous terms that payments the employee shall receive on termination will be no less than the minimum amounts required under the ESA even if the Officer’s Agreement” might purport in some circumstances to provide for a lower payment. The offer letter is neither unconscionable nor contrary to public policy in any way. It was freely entered into between two reasonably sophisticated parties in the absence of any particular disparity in bargaining power.


The case is not yet 24 hours old and is already being discussed amongst the employment bar as the hot new thing. It is.

What Justice Dunphy has done in this case is struck at the heart of the plaintiff-bar’s argument that any inclusion of the words “just cause” in a termination provision is, in itself, fatal to an otherwise valid termination provision.

When the employer in the Waksdale case was seeking leave to appeal the Court of Appeal for Ontario’s decision to the Supreme Court of Canada I wrote a blog piece titled, Employment Law Isn’t Real. In that post, I wrote:

Whereas, for contract law, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction with the overriding concern to determine “the intent of the parties and the scope of their understanding” (Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 SCR 633), for employment law, if it is unique, the interpretation of contracts is about finding interpretations that “encourages employers to comply with the minimum requirements of the Employment Standards Act” and “extends its protections to as many employees as possible”, regardless of what the parties may have actually intended or agreed to.

What the court has done in Rahman is nudged the pendulum back, ever so slightly towards true contract-law principles rather than “employment-law” principles. Justice Dunphy’s approach is thus more in keeping with the position of the Court of Appeal for British Columbia in Miller v. Convergys CMG Canada Limited Partnership, 2014 BCCA 311 (CanLII), which I canvass in considerable detail in my “Employment Law Isn’t Real” treatise.

Justice Dunphy’s commentary, about paragraph 37 of his reasons, about the need for certainty aligns with a comment former US President Obama made in his statement on the passing of former US Supreme Court Justice Ruth Bader Ginsburg on which I like to rely:

“A basic principle of the law — and of everyday fairness — is that we apply rules with consistency, and not based on what’s convenient or advantageous in the moment.”

Speaking of President Obama, it would be hard to forget the most striking word used by the then-Senator when running for office: “Hope.” Unless and until it is overturned on appeal, that is exactly what Rahman will give the employer’s bar in this province.

Contact Me

Have a question about whether the wording of your employment contract would survive judicial scrutiny? Think it might be time for a review of your employment agreements? Need someone to draft a new set of agreements for you? I can help.

I can be reached by email at or by phone at 613.238.6321 x233.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. For 2.5 years he was in-house legal counsel providing employment law advice to one of Canada’s largest corporations. He has also been a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.

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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.

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