Ontario Courts Slashes Enforceability of Many Employment Contract Provisions

Nov 1, 2022

In recent years, the Ontario courts have been increasingly strict in the reading of employment contracts.  New decisions by the courts have slashed the enforceability of many employment contracts, leaving employers scratching their heads.  Most employment contracts try to limit an employee’s severance entitlements at the time of dismissal.  Finding an illegality in the employment contract provisions, however, can allow an employee to maximize their severance entitlements. A recent decision by the Ontario Superior Court of Justice has blown open a new avenue to attack employment contracts, for the benefit of employees.

This new case considered a 65-year-old receptionist, employed at a dentist’s office. 25 years into the employment relationship, the owners introduced a new employment agreement that cut the employee’s notice entitlements to only statutory minimums – which was a very significant cut to their full entitlements. The contract also contained a conflict-of-interest provision and a confidential information provision.  Critically, both provisions allowed for termination without notice if breached.

When the dismissal came around a few years later, the employee challenged the enforceability of the new employment contract provisions.  Even though the actual termination provisions were enforceable, the court decided that the conflict of interest and confidential information provisions rendered the contract illegal for violations of the Employment Standards Act (“ESA”).  This is a very important distinction by the courts.  Even if the actual termination provision is legal and enforceable, it was enough that another clause within the contract could violate the ESA and allow for dismissal without proper notice.

This decision reminds employers the importance of having their employment contracts reviewed and revised yearly or as needed.  It is essential to have a lawyer, up to date with the current standing of employment law, check the employment contract provisions for illegalities as the law continues to develop in this area.  Similarly, employees facing dismissal or being presented with a new employment contract should always have it reviewed so that they understand their full entitlements.

If you have questions about employment contracts, we encourage you to reach out to an experienced employment lawyer. Whitten & Lublin are here to provide insight and advice into your specific circumstances. If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or by phone at (416) 640-2667 today.

Author: Rachel Patten


 

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