I noticed this article by Adrian D. Jakibchuk of the Toronto law firm Cassels Brock. It’s about the decision by Madam Justice Michelle O’Bonsawin of the Ontario Superior Court of Justice in Bergeron v. Movati Athletic (Group) Inc., 2018 ONSC 885. I’ll explain why I think it was mistaken.
Bergeron was a short-term employee of a Movati Athletic (Group) Inc. (Movati). Their dispute was about whether Movati could pay Bergeron severance and benefits under the Employment Standards Act (ESA) or whether under common law Movati was entitled to reasonable notice, which would have resulted in a more generous payout.
Here’s what the court said:
In my view, with regards to Ms. Bergeron’s Employment Agreement, there was not a high degree of clarity in her termination clause. … Ms. Bergeron’s termination clause did not contain any explanation or warning sign and it said nothing more than Movati will obey the ESA.
[T]he wording of the termination clause must be clear to rebut the presumption of reasonable notice. The wording in Ms. Bergeron’s termination clause was unclear. The evidence does not support that she knew at the beginning of her employment with Movati what her entitlement would be at the end of her employment. The wording of the termination clause was ambiguous … must be resolved in Ms. Bergeron’s favour.
Adrian notes as follows:
[T]he Court went out of its way to explain what Movati could have done to ensure that the provision ousted Ms. Bergeron’s common law notice entitlement and restricted it to ESA minimums. In the Court’s view, all that was missing was the insertion of a couple of “only”s.
Here’s the termination provision in Bergeron’s contract, with the two instances of only added by the court shown in bold and in brackets:
Movati Athletic Inc. may terminate your employment without cause at any time during the term of your employment upon providing you with notice or pay in lieu of notice, and severance, if applicable, [only] pursuant to the Employment Standards Act, 2000 and subject to the continuation of your group benefits coverage, if applicable, [only] for the minimum period required by the Employment Standards Act, 2000, as amended from time to time.
But the termination provision isn’t ambiguous. To demonstrate that, let’s consider an entirely different provision, one establishing jurisdiction (I took it from one of my confidentiality agreements):
If either party brings against the other party any proceeding arising out of this agreement or arising out of disclosure or use of Confidential Information, that party may bring that proceeding [only] in the United States District Court for the Southern District of New York or in any state court of the State of New York.
No reasonable person would argue that without the only this provision is ambiguous. Instead, it establishes nonexclusive jurisdiction: although a party may bring commence proceedings in New York, it may instead decide to bring proceedings elsewhere. Adding only turns the provision into one providing for exclusive jurisdiction, making New York the only jurisdiction for bringing a dispute.
Presence or absence of only in the termination provision in Bergeron’s contract has the same implications. A reasonable reader would realize that Movati could pay Bergeron according to the ESA. Furthermore, adding only would have been odd, in that it would have suggested that Movati would have been in breach by paying more than required under the ESA. The provision could have been structured to say that Movati wasn’t required to pay more than what it was required to pay under the ESA, but I don’t see how that would have made things any clearer for Bergeron.
This decision has two implications. First, I can understand a judge’s wanting to give an employee the benefit of the doubt. But in this case, there was no doubt. By holding for Bergeron, Justice O’Bonsawin did violence to the contract.
And second, this opinion serves as another reminder that the best defense against a judge inclined to take semantic liberties with a contract is litigators who have access to specialized expertise and so are able to push back. See this article for more about that.
Anyone think I’m missing something?
7 thoughts on “The Ontario Superior Court of Justice Takes Liberties with a Termination Provision”
With regards to the jurisdiction clause that you have used as an example, you state that without the addition of ‘only’, the clause establishes non-exclusive jurisdiction. But I do not understand what would be the purpose of mentioning the New York courts at all if the clause did not intend to establish exclusive jurisdiction?
The notion of nonexclusive jurisdiction is well established. You can go to the specified jurisdiction, but you don’t have to.
The way I’ve looked at it is that if you intended to create exclusive jurisdiction, you would say so. There’s nothing odd about getting a counterparty to agree that some specific jurisdiction is valid (think of an international counterparty who you want to be able to sue in the SDNY). And, I’ll go one further: if you want to prohibit parties from suing elsewhere, the provision should say that and not use passive voice (“an action shall be brought in the SDNY”).
Saman and Rick. I think, Ken already answered this? I think you are getting sidetracked with the exclusive/non-exclusive jurisdiction language?. I believe if you research the cases (outside of some narrow international arbitration convention scenarios) you will discover that the jurisprudence states that parties cannot preclude a court from taking jurisdiction if the court (applying the local law) determines that personal or subject matter jurisdiction attaches giving the court jurisdiction. Parties can by contract agree to give courts in a named province/state/country jurisdiction over a dispute related to their contract/relationship (and courts will usually agree to take on jurisdiction in accordance with such clauses but would not absolutely have to). In other words you can contractually add jurisdictions (or select from multiple plausible jurisdictions where the parties/contract have connections with multiple jurisdictions) but you can’t contractually remove jurisdictions. When someone uses the word “exclusive” jurisdiction this is an attempt to contractually remove jurisdictions (i.e. exclude all except those listed). When someone uses the phrase “non-exclusive” they are drafting more clearly (in my view) by recognizing the jurisprudential reality that they can’t preclude with 100% certainty that other courts may decide to take jurisdiction. The issue of attempts to exclude courts from taking jurisdiction is a very common qualification that found its way into enforceability opinions (when such opinions were still common).
Your point relates to the issue I address in my article about contracts seeking to preempt judicial discretion: https://judicialstudies.duke.edu/wp-content/uploads/2017/08/Judicature-Fall2017-contracts.pdf.
To my mind, the problem with the employment clause you have quoted is that it is a long sentence that tries to deal with several issues, namely notice period, severance payment, and group benefits coverage. It then throws in a couple of references to legislation in an undisciplined way. It may not be ambiguous, but it is unclear.
In employment cases, as in consumer contracts, there is a tendency to give the benefit of the doubt to the employee or consumer, which the judge has done. Perhaps she has bent over backwards to do so. If an employee has greater rights than under the Act, are these rights “pursuant” to the Act? Without studing the Act and assocated case law in detail, I wouldn’t know. If, for example, the Act said in terms that it was providing for minimum levels of compensation and parties could agree more, one might have an argument that the “more” was pursuant to the Act.
But I agree that “only pursuant” doesn’t take us any further forward. I think the judge’s main problem is that she has tried a quick fix to demonstrate what is wrong with the wording. She should have left well alone.
I have been a lawyer in Alberta, Canada (not Ontario where the case comes from but I went to an Ontario law school) for about 30 years. I have drafted many, many termination clauses over the years and read numerous cases dealing with termination clauses always trying to improve the termination clauses I use (to include the latest suggested drafting “clarifications” from the courts). However, when drafting such provisions I can’t help but feeling like the greyhound racing at the dog track – no matter how good your attempt, the rabbit is always kept a little out of reach. I am not sure that I have ever read a Canadian common law case where the courts have upheld a “employment standards legislation only” termination provision – there must have been a few, but they are so rare that I can’t remember any. The courts have historically decided to imply interpretation standards for these types of contracts that depart from the standards used generally for other contracts (there is no legislative basis for this historical interpretative bias in favour of employees). However, there is still supposed to be a freedom to determine contract terms, so the courts (when they decide a severance clause wasn’t adequate) usually play lip service to the freedom to contract by saying that there would have been preferable alternative wording that the parties could have used to agree to limit severance. Call me a cynic, but I seriously doubt that the preferable alternative wording suggested by one court would be deemed adequate if lawyers included the preferable alternative wording in a contract and then that contract made its way to a future court case. In my view the courts in these cases are usually engaging in “results oriented reasoning” – making an early decision to find for the employee (and against the severance clause) and then looking for the reasons to justify that result. Because of these court engineered special interpretation standards (for employment termination provisions) and frequent results orientated reasoning, I question whether reviewing the drafting and the court cases for employment termination provisions would ever provide useful “teachable moments” for those interested in achieving better clarity in our contract drafting.
When I have seen employers successfully use these clauses the “success” is usually based on convincing the employee that the employer is prepared to expend significant resources litigating and the employee doesn’t have the stomach (or budget) for a protracted legal battle. Thus, from a practice point of view it is very dangerous to advise an employer client that such clauses (even if including all of the drafting suggestions from prior cases and all the clear drafting suggested by A Manual of Style for Contract Drafting) have anything other than a slim chance of actually holding up if the employee actually decides to litigate them.
FYI, one of the key features of the Canadian employment standards legislation (each province has its own unique legislation but they are similar) is not just that the legislation establishes minimum severance obligations/payments (as well as numerous other employment terms) but there is also a government agency tasked with helping employees recover the payments they are entitled to under the legislation (i.e. doing away with the need for employees to seek and pay for legal assistance). However, the employment standards agencies do not get involved with anything outside their specific legislative mandate (i.e. don’t advise on what common law severance/damages would be and don’t help collect common law damages). In Alberta (which I suspect is similar to Ontario), the minimum severance for an employee with 2 years service is 1 week (2 weeks for 4 years, 3 weeks for 6 years, etc. up to 8 weeks after ten years). Common law standards vary but a common rule of thumb is 1 month (of notice or severance pay in lieu of notice) per year of service topping out at 10-24 months severance depending on the type of position and other circumstances. The financial advantage for employers to try to override common law severance with specific contract terms that limit severance to statutory minimums is obvious.