By Howard Levitt and Michael Penner

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Howard Levitt: Small differences in provincial ESAs lead to big differences in court Back to video

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In employment law in recent years, almost on a daily basis, lawyers are lauding or lamenting new court decisions regarding the validity of termination clauses. Most recently, in British Columbia, the business community and the lawyers who assist them were singing the praises of the Court of Appeal decision in Egan v. Harbour Air, which seemingly moved the needle in favour of employers who rely on termination clauses to significantly reduce their financial obligations when firing employees without cause.

While this issue, at first blush, may seem arcane to anyone outside of the legal cloister, it has a significant impact upon workers being let go from long-term (or even short-term) employment. This is especially true of the baby boomer generation, many of whom have worked for a single employer for twenty years or more and risen to senior positions.

Given their vintage, their original employment contracts likely did not contain any termination clause and the general law of wrongful dismissal would dictate the terms of their departure. However, if that employee had been recently promoted, their new position likely was accompanied by a new contract. It is here where we often find that the employer, now wise to the law, has inserted a termination clause severely limiting reasonable notice to the minimum amounts dictated by the Employment Standards Act of the province or Territory where the employee works.

What does this mean in real terms? A 20-year employee may expect to receive up to 24-months’ pay in lieu of notice; with a termination clause, that amount could be capped at eight weeks. For an executive earning $240,000 a year, this could be the difference of receiving $480,000 versus $40,000.

With those stakes, it is no wonder that the courts are generating frequent decisions of consequence. There is no middle ground in these disputes: either the termination clause applies or it does not.

Complicating this issue is that the law in every province and territory has its own unique permutations which will influence the outcome. In Egan v. Harbour Air Seaplanes, the B.C. Court of Appeal took some time to assess why court decisions in B.C. tended to favour the employer while those in Alberta and Ontario trended toward the employee. They found that a slight variation in the wording of each province’s Employment Standards Act changed the legal foundation for the termination clause and thus altered the court’s acceptance or rejection of such clauses.

As employment lawyers, we assiduously follow the latest cases within our jurisdiction so that we are aware of even the smallest incremental advantage or disadvantage that will impact our clients’ cases. This process is far easier in larger jurisdictions like Ontario, Alberta and British Columbia as the courts generate sufficient volume of cases that trends can be identified with some degree of predictability. It gets much more tricky in the hinterlands, where the local courts have not ruled on this issue with sufficient regularity to establish a precedent.

Regional specialization thus becomes an absolute necessity for the employment lawyer to effectively assail or defend the termination clause issues of their clients.

Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada. Michael Penner is the  head of the B.C. office of Levitt LLP.

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