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Potential Future Violation of the Employment Standards Act Void an Entire Termination Provision

Posted On: September, 29 2016

There has been a debate over the past years regarding the legality of a termination provision in an employment contract which is compliant with the Employment Standards Act, 2000, [ESA] at the time of termination but which has the potential to violate the law in the future. In a recent case, Garreton v Complete Innovations Inc., 2016 ONSC 1178 (CanLII), the Court found that a termination provision in an employment contract was unenforceable if it would eventually lead to a breach of the ESA in the future.

In Garreton, the employee was terminated after three years and her contract provided for payment of pay in lieu of notice in accordance with the mandatory minimums set out in the ESA. However, the contract also provided for pay in lieu of notice for employees with 5 or more years of service which violated the ESA. The employee argued that the entire provision was void.

The Court agreed that a termination clause which would be void and unenforceable because it violated the ESA for an employee of more than 5 years must also be void for an employee of less than 3 years. In so holding, the judge stated that the employment contract must be considered at the time it is executed, not only at the time of termination. If, at the outset, the termination provision does not accord with notice provisions and severance provisions (if applicable) of the ESA, then it is void and unenforceable.

This decision is extremely important for employers and employees. It highlights the crucial nature of language chosen in the employment agreement. Employers should carefully consult with a lawyer when drafting these agreements and employees should consult with a lawyer when contemplating whether to sign an employment agreement containing a termination provision that may violate the ESA in the future

 

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