Limiting Common Law Notice Entitlements Through Termination Clauses

Jul 5, 2018

The main effect of termination clauses is to limit a possible much greater notice payment at common law, which is why rigorous standards have been enforced by the courts as of late. Over the past couple years, the courts have scrutinized termination clauses, placing significantly more accountability on employers to ensure the language used in no way can be interpreted as offering less than the minimum standards guaranteed by employment standards law in any respect. As may be the case, however, employees may not be aware of their greater common law entitlements at the time they agree to a termination clause. This raises the question of whether the termination clause has to make mention of common law entitlements to be valid.
This was an issue raised in Nemeth v. Hatch Ltd. (ONCA 2018). Specifically, the termination clause in question stated:
The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.
Nameth here challenged that the termination clauses was invalid as it did not explicitly mention an exclusion of common law entitlements, thus rendering the clause unenforceable. The court ruled, however, that the clause only needs to show an intention to limit common law entitlements. In other words, explicit mention of displacing common law entitlements does not need to be contained within a termination clause. As this ruling provides a definitive answer as to whether the common law needs to be mentioned in a termination clause, employers still need to be very prudent when implementing termination clauses. It is always advisable to seek the services of an experienced employment lawyer.

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