Ontario Court of Appeal

The Ontario Court of Appeal released yet another decision on the interpretation and enforceability of termination clauses: Rossman v. Canadian Solar Inc., 2019 ONCA 992. Recent appellate decisions on this matter have been inconsistent on this issue and unfortunately, Rossman is more bad news for employers. Nevertheless this decision provides guidance that should be considered in reviewing and drafting termination provisions in employment contracts.
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Courts usually treat incentive compensation as part of the compensatory damages owed in lieu of common law reasonable notice of dismissal. However, if the employment contract and/or the incentive plan unambiguously extinguish entitlement to incentive compensation upon notice of dismissal, the agreement(s) will generally prevail over the common law entitlement. In O’Reilly v. IMAX Corporation, the Ontario Court of Appeal once again stressed the importance of using precise language in bonus or stock option plans to deny, or otherwise limit, employee entitlement to incentive compensation during the reasonable notice period.
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Employers often wish to enter new or updated employment agreements with existing employees. The driving force is typically that circumstances have changed, but it can also be that the employer simply wants different or additional terms. However, the employer must give the employee valid consideration, otherwise the new or updated agreement will not be enforceable.
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The Ontario Court of Appeal has reiterated that, barring exceptional circumstances, reasonable notice for dismissal without cause will not exceed 24 months. The Court partially overturned the lower court’s decision in Dawe v The Equitable Life Insurance Company of Canada, which also ruled on the enforceability of unilateral changes to the employer’s bonus plan.
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After-acquired cause, by definition, arises when an employer discovers just cause for termination after the employee has been dismissed on a without cause basis. This begs the question: Can an employer assert after-acquired cause when it has reason to suspect just cause prior to the termination, but proceeds on a without cause basis due to the employee’s representations of innocence? The Ontario Court of Appeal has answered affirmatively.
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Faith-based, as in “good faith”, that is.

Not that long ago the Supreme Court installed “good faith” as core to the fabric of contractual relations in Canada whether commercial or employment, whether ostensibly arms-length as “independent contractor” or employment per se. Implying a duty to act fairly in contract is not foreign to other jurisdictions— it is foundational to EU legal principals and long-since present in the Restatements of US law.

Here, not so much. In the 60s Ontario Justice Goodman enthused about incorporation of “good faith” as a distinct implied term of contract; alas conservative sentiment rendered that distillation jurisprudential ‘moonshine’. Some 50 years on Bhasin v. Hrynew (2014) refined that elixir into single malt: the SCC aspirationally confirmed that we all gotta have ‘faith’.

While it remains difficult to be ‘sort-of pregnant’, good faith became operational but not as an independent “cause of action”. But as an influencer of import in contractual relations, it has certainly come of age: Mohamed v. Information Systems Architects Inc., 2018 ONCA 428.
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In recent years, Canadian courts have increasingly heard large civil claims against Canadian companies for alleged human rights violations in their foreign operations. As we have discussed previously, judges faced with these claims must determine whether the court’s jurisdictional reach extends to the company’s activities in its global supply chain, thus permitting foreign claimants to pursue their action in Canada.
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In its first decision of 2019, the Ontario Court of Appeal has overturned the lower court’s decision in Heller v. Uber Technologies Inc., 2019 ONCA 1. The Court of Appeal held that an arbitration clause requiring arbitration in the Netherlands of disputes between drivers and Uber to be invalid and unenforceable. Based on the presumption that Uber drivers are employees of Uber, the Court of Appeal found that the arbitration clause was a prohibited contracting out of Ontario’s Employment Standards Act, 2000 (ESA).
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Last week, the Ontario Court of Appeal released yet another decision on the interpretation and enforceability of termination clauses: Amberber v. IBM Canada Ltd., 2018 ONCA 571. Recent appellate decisions on this issue have been inconsistent and/or provided less than clear guidelines, see here, here, here and here. In contrast, Amberber is a bright spot for employers. The Court not only reaffirmed the principle that termination clauses must be interpreted as a whole, but also held that courts should not strain to create an ambiguity where none exists.
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