An employee’s level of sophistication and access to independent legal advice has no bearing on the enforceability of a termination clause.
Rahman v. Cannon Design Architecture Inc, 2022 ONCA 451
The Ontario Court of Appeal recently found that subjective considerations cannot override the plain wording of a termination clause. The decision reiterated that it is the plain wording of a termination provision that matters, compliance with ESA obligations on termination does not save a termination provision that contravenes the ESA.
The facts
Ms. Rahman was employed by CannonDesign as a senior architect, principal, and office practice leader for over 4 years. She was given 4 weeks base salary on termination without cause pursuant to the offer letter which limited the company’s liability to the greater of the notice required in her Officer Agreement or the ESA minimum.
Prior to joining the company, she signed 2 employment contracts: an offer letter and an Officer Agreement. The contracts had conflicting termination for cause provisions, however the offer letter provided that in the event of a conflict between the two contracts, the offer letter will govern. Due to this stipulation the just cause provision of the offer letter prevailed. It stated that the company had the right to terminate Ms. Rahman’s employment without notice or payment in lieu thereof if she engaged in conduct that constituted just cause for summary dismissal.
Ms. Rahman’s termination letter stipulated that she would receive 4 weeks of termination pay pursuant to the without cause termination provision in the Officer Agreement.
Motion Decision
Ms. Rahman sued for wrongful dismissal and moved for summary judgment, asking the court to declare that the termination provisions in her contracts were invalid because they conflicted with the ESA.
The Judge interpreted the termination provisions as requiring payment of ESA minimums, and therefore found them to be valid. The judge further rejected the argument that the “for cause” terms were invalid because:
- the plaintiff received independent legal advice (“ILA”) on the offers;
- She was a plaintiff of “experience and sophistication”; and
- the parties’ subjective intention to comply with the ESA.
Ms. Rahman appealed.
The Court of Appeal Decision
The Court of Appeal found that the judge erred in considering Ms. Rahman’s sophistication, access to ILA, and the parties’ subjective intention to not contravene the ESA as overriding the plain language of the provisions in the contracts. The Court held that: “By allowing subjective considerations to distort and override the wording of those provisions, the motion judge committed an extricable error of law.”
The Court reiterated that it is the wording of a termination provision that determines whether it contravenes the ESA, compliance with ESA obligations does not save an invalid termination provision. The fact that Ms. Rahman was paid her ESA entitlements on termination did not have the effect of saving the termination provision. The invalidity of the just cause provision rendered the other termination provisions unenforceable.
Takeaways:
An employee’s level of sophistication and access to ILA has no bearing on the enforceability of a termination clause that contravenes the ESA. It is the plain wording of the termination provision that matters.