When is a termination provision unenforceable for not being brought to the employee’s attention?

Modern employment agreements typically include harsh termination provisions which seek to limit an employee’s rights to the statutory minimum. (See my previous blog post where I outline employees’ common law severance rights).

If the employer seeks to do so, the wording of the employment contract must clearly and unambiguously indicate the limitation and the significance of the provision. The courts recognize that employers and employees’ do not have the same level of bargaining power when it comes to negotiating these agreements. Therefore, employers have an obligation to call the employee’s attention to harsh provisions of an employment contract if they intend to attempt to enforce those harsh terms. Employers must also draft agreements that limit employees’ common law entitlements very carefully, correctly, and in accordance with the ESA, before they will be permitted to rely on those employment agreements.

This is especially the case with termination provisions, which can be unenforceable for a plethora of reasons. (In fact, there are so many possible reasons that I can’t count them on both hands). This blog focusses on one such reason, namely, the failure of an employer to bring the termination clause to the employee’s attention – and including that clause within a big, complicated, standard form document.

Employers may have a duty to specifically bring the termination clause to the employee’s attention prior to their signing the contract.

In Ceccol v. Ontario Gymnastic Federation (Ceccol), the employee and employer formalized the employment relationship through a series of one-year contracts which provided only for statutory notice period under the Employment Standards Act, 2000 (ESA). [Ceccol v Ontario Gymnastic Federation, 2001 CanLII 8589 (ON CA).] While working for the company for 15 years, the employee began to take on a full-time permanent position, yet the contracts were seen as purely administrative. The court held that the employer was required to call the employee’s attention to the specific termination provision in the employment contract if they intend to rely on it.

Ceccol is known mostly for the proposition that a series of fixed-term employment agreements will typically be treated an indefinite employment relationship. However, the Court also cited to a well-known contracts case Tilden Rent-A-Car Co v. Clendenning (Tilden). The court in Tilden held that because of modern times, standard form printed documents are signed without being read or understood. In such cases the party seeking to rely on the terms of the contract should know that the signature of the party does not represent the true intention of the signer. [Tilden Rent-A-Car Co. v Clendenning, 1978 CanLII 1446 (ON CA).] It may also be the case that the party signing may be unaware of the stringent and onerous provisions which the standard form contains. Under such circumstances the party seeking to rely on the terms must bring it to the attention of the signing party. [Tilden.] In the absence of such reasonable measure, the signing party denying having knowledge of the terms of the provision does not have to prove fraud, misrepresentation or non est factm.

Notably, the Court in Ceccol did not agree with the Plaintiff’s argument that since the termination provision was not brought to their attention, it was not enforceable. (The Court agreed with the Plaintiff for other reasons). However, the Court did leave the door open for future arguments to be made on this point, in cases where a complex, standard form employment contract is used. The Court wrote, at footnote 4 of the case:

“I note that my analysis on the second issue in this appeal differs in part from that of the trial judge. The trial judge found that the termination provision was clear but that it did not apply to Ceccol because a standard form contract was used and the termination provision was especially stringent and onerous; as a result, the employer had a duty to draw the termination provision to Ceccol’s attention. In my view, the employment contract was not similar to the complex standard form printed car rental agreement in issue in Tilden Rent-A-Car Co. v. Clendenning (1978), 1978 CanLII 1446 (ON CA), 18 O.R. (2d) 601, 83 D.L.R. (3d) 400 (C.A.), which the trial judge applied. Accordingly, the Federation did not have a duty to specifically draw the termination provision to Ceccol’s attention.”

The employer must ensure employment contracts are written in legible fonts and harsh provisions stand out in a contract.

Employers cannot rely on terms in the employment contract that are hidden in fine print so that they are not set out clearly and understandably. [Trigg v MI Movers International Transport Services Ltd. (C.A.), 1991 CanLII 7363 (ON CA).] In addition, employers will have a hard time relying on employment contracts that contain important provisions on the back of the document. [Trigg]. Lastly, employers should ensure that important provisions in employment contracts do not resemble standard paragraphs. [Ceccol.]

Does that mean employers have to review every provision of the employment contract?

As demonstrated by the case law above, employers may be punished for hiding or obscuring important aspects of the employment contract. However, in Finlan the employee argued that the employer was required to point out the strengths and weaknesses of each provision in the contract of employment. [Finlan v Ritchie Bros. Auctioneers (Canada) Ltd., 2006 BCSC 291 (CanLII).] The court disagreed and held there was no requirement of a prospective employer to go through the contract so long as the employee is given time to review a proposed employment contract on their own, without any influence from the employer, and given an opportunity to seek out legal advice. The court further stated that Mr. Finlan understood the terms of the employment agreement and he chose to sign the contract after weighing the risks.

Takeaways

The key for employees reviewing an offer of employment is to carefully review and understand the employment contract before accepting the offer. The employee may be in a position to negotiate a better termination provision with their employer. If an employee is concerned it is always best to have an employment contract reviewed by an experienced lawyer.

Employees should consider:

  • Whether their employment contract adheres to employment standards. If not, then the termination clause is not enforceable, and the employee is entitled to common law notice upon termination.
  • Whether the contract uses the word “only” (or words with similar effect) to make it clear that the employee has accepted that they will be receiving nothing more than the ESA provides. It is not enough to merely say that an employee will receive ESA entitlements upon termination.
  • Whether the employment contract specifically contract out of the common law?

The courts are cracking down on poorly drafted termination clauses. Employees who decide to accept an offer of employment that contains an enforceable termination clause should ensure they understand what terms they are agreeing to.

**A special thanks to Kateryna Borodenko, student at Prior Law, for her fabulous assistance in drafting this blog post!**

Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving. I encourage you to reach out with any specific questions.

Leave a Reply

Your email address will not be published.