- with Inhouse Counsel
- with readers working within the Oil & Gas and Law Firm industries
The Ontario Court of Appeal’s recent decisions in Baker v. Van Dolder’s Home Team Inc. and Li v. Wayfair Canada ULC may be among its most significant in the field of employment law in the past decade. Certainly, the volume of commentary on these cases would suggest that they are.
In simple terms, the Court was tasked with reconciling two lower court decisions that looked at very similar wording in two employment contracts and came to different conclusions. In Baker, the motion judge had found that a termination without cause provision which allowed the employer to terminate the employee’s employment “at any time” was unenforceable because it had the potential to violate the Employment Standards Act (there are certain circumstances where, for a period of time, the employer cannot terminate an employee without cause, such as upon return from a maternity leave). That judge also found the “with cause” termination provision in the contract to be unenforceable.
In Li, the motion judge was also confronted with language that permitted without cause dismissal “at any time”, but found it did not violate the ESA because other language within the contract made it clear that the employer intended in all cases to comply with the ESA.
The Court of Appeal clarified that, while the interpretation of employment contracts engages a specialized analysis that considers the power imbalance inherent in the employer-employee relationship, contracts must still be read as a whole. The Court noted that the modern approach to contract interpretation involves a “practical, common-sense approach” that focuses on the objective intention of the parties in light of the words used and the surrounding circumstances.
Ultimately, the Court of Appeal held that the termination provisions in both employment contracts were enforceable. In Baker, this included both the without-cause and with-cause provisions; in Li, the Court upheld the without-cause provision challenged on appeal.
From this author’s review of the commentary on Baker and Li (particularly from employer-side lawyers) the focus seems to be that “common sense” has prevailed, and that overly technical or hypothetical-dependent interpretations of employment contract language advanced by employee/plaintiff counsel will now be rejected. This is probably correct.
However, an important part of the Court’s handling of these appeals is what it expressly did not address. Before the hearing, the appellant asked the Court to convene a five-member panel so that its earlier decision, Waksdale v Swegon North America Inc., could be revisited. In Waksdale, the Court of Appeal found that if a termination provision in an employment contract violates the ESA – even if it is not a provision being relied on by the employer to terminate – all of the termination provisions are invalidated and unenforceable. The Court declined to convene a five-member panel. Practically speaking, this means Waksdale remains good law in Ontario.
Although Waksdale is now six years old, there are still many, many Ontario employment contracts in effect that predate the decision. Of those, many will contain language that violates the ESA. Indeed, many contracts post-date the Waksdale decision and get something wrong.
As such, there is still room for advocacy in the interpretation of employment law contracts. Plaintiff-side advocates will continue to craft arguments as to why a termination clause is unenforceable. Employer-side advocates now have Baker and Li to rebut the outlandish arguments. But there remains an abundance of poorly drafted employment contracts sitting in dusty employee files in HR departments throughout Ontario. As long as that is the case, there will be room for good advocacy on both sides of a wrongful dismissal claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
