In the recent case of Bertsch v. Datastealth Inc., 2024 ONSC 5593 (Bertsch), an Ontario court upheld a termination provision that did not specify every detail. While recent decisions suggest that such provisions may have to be flawless to be enforceable, Bertsch is a welcome decision showing that employers do not necessarily have to meet that high bar to protect themselves.

Key Takeaways

Bertsch reminds employers of the importance of including clear and compliant termination provisions in employment agreements. Ontario employers should review their agreements to ensure they meet the requirements of the Employment Standards Act, 2000 to avoid potential legal challenges. Employers should continue to confirm their termination provisions are:

1. Clear and unambiguous to avoid disputes and potential invalidation by the courts.
2. Compliant with the ESA and its regulations.
3. Inclusive of language stating that compliance with the ESA and whatever other entitlements are listed in the employment agreement satisfy any common law notice of termination or pay in lieu thereof.

Bertsch demonstrates that while courts will continue to closely scrutinize termination provisions in employment agreements, employers must only ensure that the provisions are legal and unambiguous. This provides some relief for Ontario’s employers by indicating that they do not necessarily have to rely on “perfect” termination clauses that reference all scenarios and laws in their employment agreements to enforce them.

Even with this positive decision for employers, we continue to encourage all Canadian employers to assess the enforceability of termination provisions in existing employment agreements.

Background

Gavin Bertsch, the plaintiff, was employed by Datastealth Inc. for about eight and a half months until his termination on June 7, 2024. His employment agreement limited his rights on termination to the minimal entitlements under the ESA, and explicitly excluded common law notice requirements. Upon termination, his employer provided Mr. Bertsch four weeks’ pay in lieu of notice, which were greater than his ESA entitlements.

Mr. Bertsch’s termination provisions were as follows:

5. Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations,…including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.

You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.”

11. (a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning under the [ESA] …you shall instead receive your minimum entitlements under the [ESA]…

(h) This Agreement constitutes the complete understanding between you and the Company with respect to your employment, and no statement, representation, warranty or covenant have been made by you or the Company with respect to this Agreement except as expressly set forth herein. The parties have expressly contemplated whether there are any additional implied duties owed by the Company to you, at common law or otherwise, outside the written terms of the Agreement or under statute and confirm that there are no such obligations. This Agreement shall not be altered, modified, amended or terminated unless evidenced in writing by the Company.”

(k)… The invalidity, for any reason, of any term of this Agreement shall not in any manner invalidate or cause the invalidation of any other term thereof…”

Mr. Bertsch challenged the enforceability of these termination provisions, arguing that they were ambiguous and did not properly reference the ESA and its regulations. Specifically, he claimed that the provisions were void because they would allow termination for cause without notice, regardless of whether there was “wilful misconduct, disobedience or wilful neglect.” He argued that this was contrary to the Termination and Severance of Employment, O. Reg. 288/01 regulation under the ESA.

The defendant, Datastealth Inc., filed a motion to determine the interpretation of the relevant contractual provisions as a matter of law and to strike out or dismiss the claim as disclosing no tenable cause of action.

Ontario Superior Court’s Decision

The court found that the termination provision was enforceable. The provisions were clear and unambiguous, and they properly excluded the employee’s entitlement to common law notice. Justice Stevenson emphasized that despite not referencing the specific relevant regulation under the ESA, there was no reasonable alternative interpretation of the relevant clauses that might result in an illegal outcome. In other words, there was no reasonable interpretation of the provisions which would be contrary to the minimum requirements of the ESA and its regulations.

The court concluded that the termination provisions were therefore valid and enforceable, and dismissed the plaintiff’s claim.

Notably, Justice Stevenson also commented on the “failsafe” clause outlined in section 11(a) above, suggesting that it was not problematic, and may have applied here had the termination provision been less clear. The court also distinguished it from the severability clause at 11(k), highlighting that it had no application to this matter. While this comment did not impact the outcome of the case, it provides helpful clarity for employers who include “failsafe” clauses in their contracts.

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For support reviewing your company’s employment agreements (and the termination provisions contained therein), please contact a member of our team. The upfront investment in legal review can eviscerate the need for lengthy (and costly) disputes later.