Appeal Court Rules On Termination Clauses And Proper "Failsafe" Language

The differing interpretations by the courts of employment contract provisions which limit entitlements upon termination has caused considerable confusion of late. The Ontario Court of Appeal has rendered a helpful decision which may serve to lessen some of the confusion.

The Court reversed a lower court decision and found that a clause in an employment contract which stipulated the amounts owing to an employee upon termination was enforceable. It also concluded that a "failsafe provision" in the clause (a "catch-all" provision which stated that the employee shall always receive the entitlements under the Employment Standards Act, 2000 (ESA)) was not a severability provision but ensured that any non-compliant part of the clause could be "read up" to comply with the ESA.