Drafting an employment agreement, and specifically a termination provision, is not a straight-forward task. It is common to see termination provisions like this:
“The Corporation may terminate your employment at any time without cause, upon providing you with notice or pay in lieu of notice as per the Ontario Employment Standards Act, 2000. If there is just cause for dismissal, the Corporation may terminate your employment at any time for cause, without any obligation to you on account of notice or pay in lieu of notice or severance pay.”
Anyone thinking this condominium corporation is protected from wrongful dismissal claims would be wrong. Not only do courts in Ontario hold employers to strict standards when it comes to termination clauses in employment agreements, this standard can be akin to a moving target.
Since courts are always receptive to new and creative arguments that invalidate termination clauses, a provision that may have been sufficient years ago is now likely vulnerable to challenge.
The plain wording of a termination provision must accomplish two tasks: it must clearly and unambiguously state what a terminated employee will receive upon the termination of their employment, and it must not, in any way shape or form, provide less than what the employee is entitled to receive under employment standards legislation.
If a termination provision excludes any minimum statutory entitlement (inadvertently or otherwise), or doesn’t pass muster based on current case law, an employee becomes entitled to common law reasonable notice, which is significantly more generous than the legislated minimums. Case in point, while statutory termination notice and pay in lieu is counted in weeks, common law notice is contemplated in months.
With that foundation, here are the top five reasons why a condominium corporation’s employment contracts need to be reviewed regularly:
What worked yesterday may not work today
Employment law is ever-changing. A termination clause deemed compliant by a judge five years ago may now be unenforceable due to new and prevailing precedents. With judges deciding cases regularly and the government periodically revising the legislation, drafting an enforceable termination provision can never be thought of as a one-and-done exercise. All too often we are forced to break the news to a board and/or property manager that the termination clause drafted in 1999 for the superintendent they wish to terminate is invalid, and as a result, a dismissal that could have cost eight weeks of pay is now going to cost 18 months of pay or more.
Hidden landmines
When put in front of a judge, an employee’s entire contract comes under intense scrutiny. The employment contract may include termination-related clauses in other provisions, and if there is a deficiency in any provision that relates to termination, that single deficiency, regardless of its location, can bring all termination-related clauses crashing down. For example, an Ontario court recently invalidated an otherwise enforceable termination provision because part of the agreement dealing with confidential information purported to allow the employer to terminate in a manner offside with employment standards legislation.
What you “meant” to say doesn’t matter
Many employers mistakenly believe that their intention to comply with employment standards legislation is sufficient. Unfortunately, intention is not enough. A court will look exclusively at the contract’s wording. If the wording doesn’t comply with legislation, the termination provision is toast. Even an employer’s post-termination conduct (taking all the correct steps and providing all minimum entitlements) cannot rectify a deficient termination provision.
Ambiguity gives employees the nod
To top it all off, a court can also invalidate a termination provision simply because the language could be interpreted in more than one way. With the court’s inclination to side with non-unionized employees, a judge will interpret an ambiguous termination provision in the employee’s favour, rendering it unenforceable and awarding a much more generous common law termination notice in its place.
Limiting liability
Having an enforceable termination provision in an employee’s contract is the single most important thing a condominium corporation and/or property manager can do to limit liability for employee severance claims, otherwise known as “wrongful dismissal”.
Recently, a condo corporation was terminating a 64-year-old, part-time superintendent. The corporation employed the superintendent for approximately 30 years. If the corporation had used an employment agreement with a termination provision updated for today’s standards, the corporation’s liabilities would have been limited to eight weeks of pay and benefits, plus payment of accrued vacation pay. However, because the termination clause was decades-old and thus completely unenforceable, it ultimately cost the corporation 21 months of pay, plus the cost of benefit continuation and bonuses over that period.
It is crucial to regularly review and update employment contracts. Outdated employment contracts expose condo corporations to financial and legal risks they could otherwise avoid. By taking a proactive approach to regularly review and update employment agreements, ideally in conjunction with annual salary adjustments, boards and/or property managers can protect the corporation by ensuring compliance and limiting liability.
Ryan Edmonds and Alexis Radojcic are condo lawyers at Lash Condo Law LLP.
