In Bertsch v. Datastealth Inc., 2024 ONSC 5593, the Ontario Superior Court was asked to dismiss a claim for wrongful dismissal as disclosing no tenable cause of action, on the basis that the contract had a valid termination provision limiting the employee to the Employment Standards Act, 2000 (“ESA”) minimums, which had been provided.
In addition to being a ‘win’ for employers because the court found that the termination provisions did not run afoul of the ESA, the decision serves as a useful reminder to wrongful dismissal litigants regarding the appropriateness of a Rule 21 motion to determine whether a contractual termination provision is valid and enforceable.
Factual Background
The plaintiff was terminated by the defendant employer on June 7, 2024, without cause, after approximately 8.5 months of service.
The written employment contract between the parties limited the ex-employee’s rights on termination to only the minimum entitlements prescribed by the ESA. The impugned termination clause read, in part:
- Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations,…including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
The plaintiff commenced an action, seeking damages for failure to provide reasonable notice at common law. The plaintiff argued that the contractual termination provisions were not enforceable because they were ambiguous and failed to reference the statutory exemptions from compensation on dismissal, in violation of the ESA and O.Reg. 288/01 – Termination and Severance of Employment.
The defendant’s position was the opposite; namely, that the contractual termination provisions did not contravene the ESA and that the intention of the parties was clear and unambiguous.
Rather than wait for the former employee to advance the action, the employer moved pursuant to Rule 21.01.(1)(a) of the Rules of Civil Procedure, seeking a determination that the contractual termination provisions were valid and binding.
The Defendant’s Rule 21 Motion is Granted
Rule 21.01(1)(a) provides that a party may move before a judge for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial savings of costs.
In this case, the Court granted the defendant employer’s motion, finding that Rule 21.01(1)(a) was an appropriate mechanism for determining the interpretation of the contractual termination provisions at issue. While Justice Stevenson acknowledged that there are circumstances in which Rule 21 is not appropriate for issues involving contractual interpretation, he found this case to be ripe for determination before trial: “The current case is a good example where the court’s interpretation of the agreement at this stage will be useful, efficient and just.”
In reviewing the provisions at issue, Justice Stevenson considered and applied the legal principles. In the end, he determined that the clause did not result in any breach of the ESA or its regulations: “There is no reasonable alternative interpretation of the relevant clauses here that might result in an illegal outcome.” He also concluded that the exclusion of common law notice was clear and that the relevant provision was enforceable.
Takeaways
Although this case can be considered a ‘win’ for employers, there is no question that courts in Ontario will continue to safeguard employee rights in the context of employment relationships. Employers should continue to be mindful of this reality, and regularly seek legal advice to review and reconsider the language in their existing employment agreements and templates to address potential concerns.
This decision also serves as a strategic lesson for parties litigating employment disputes. We anticipate this decision may lead to an increase in the number of Rule 21 motions being advanced by employers in Ontario defending breach of contract claims.
Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s Labour & Employment Group.
