



COURT OF APPEAL FOR ONTARIO

CITATION: Rossman v. Canadian Solar Inc., 2019 ONCA 992

DATE: 20191217

DOCKET: C66458

MacPherson, Pepall and Lauwers JJ.A.

BETWEEN

Noah Rossman

Plaintiff (Respondent)

and

Canadian Solar Inc. and Canadian Solar Solutions
    Inc.

Defendants (Appellants)

Sean G. Foran and Aisling Flarity, for the appellants

Eytan Rip, for the respondent

Heard: October 24, 2019

On appeal from the order of Justice Marc R. Labrosse of
    the Superior Court of Justice, dated December 14, 2018, with reasons reported
    at 2018 ONSC 7172.

MacPherson J.A.:

A.

introduction

[1]

The issue in this appeal is the enforceability of a termination clause
    in a written contract of employment. On a motion for summary judgment, Labrosse
    J. held that the termination clause in Noah Rossmans operative employment
    agreement was void and unenforceable because it was ambiguous and potentially
    contravened the
Employment Standards Act, 2000
, S.O. 2000, c. 41 (
ESA
).
    Accordingly, the motions judge determined that Mr. Rossman was entitled to
    termination in accordance with common law principles which he fixed at five
    months. The employer, Canadian Solar Inc. and Canadian Solar Solutions Inc. (collectively,
    Canadian Solar), appeals.

B.

facts

(1)

The parties and events

[2]

Mr. Rossman began his employment with Canadian Solar in May 2010. The
    parties entered into an employment agreement on May 6, 2010 (the 2010
    Employment Agreement). Mr. Rossman started as a Regional Sales Manager with a
    base salary of $67,000 and entitlement to sales commissions.

[3]

On August 22, 2012, Canadian Solar sent Mr. Rossman a new employment
    contract (the 2012 Employment Agreement) that transferred him to a project management
    role. The new salary was $82,500 with benefits and a potential bonus
    entitlement up to a maximum of 20 per cent of his base salary. There was no
    commission component in this second contract.

[4]

Prior to signing the 2012 Employment Agreement, Mr. Rossman received
    advice from a lawyer and discussed the contract with his brother-in-law, who
    was an in-house counsel at a corporation. Mr. Rossman signed this contract on
    August 29, 2012.

[5]

Both the 2010 Employment Agreement and the 2012 Employment Agreement
    included the same termination clause (the Termination Clause):

9. Termination of Employment

9.01 The parties understand and agree that employment pursuant
    to this agreement may be terminated in the following manner in the specified
    circumstances:



(c) by the Employer, after the probation period, in its
    absolute discretion and for any reason on giving the Employee written notice
    for a period which is the greater of:

(i) 2 weeks, or

(ii) In accordance with the provisions of the
Employment
    Standards Act (Ontario)
or other applicable legislation,

or on paying to the Employee the equivalent termination pay in
    lieu of such period of notice. The payments contemplated in this paragraph
    include all entitlement to either notice of pay in lieu of notice and severance
    pay under the
Employment Standards Act Ontario
.
In
    the event the minimum statutory requirements as at the date of termination
    provide for any greater right or benefit than that provided in this agreement,
    such statutory requirements will replace the notice or payments in lieu of
    notice contemplated under this agreement
. The Employee agrees to accept
    the notice or pay in lieu of notice as set out in this paragraph as full and
    final settlement of all amounts owing by the Employer on termination, including
    any payment in lieu of notice of termination, entitlement of the Employee under
    any applicable statute and any rights which the Employee may have at common
    law, and the Employee thereby waives any claim to any other payment or benefits
    from the Employer.
Benefits shall cease 4 weeks from the
    written notice
. [Emphasis added.]

[6]

Canadian Solar terminated Mr. Rossman without cause on February 12,
    2014. Mr. Rossman commenced an action against Canadian Solar, seeking damages
    for wrongful dismissal and the payment of a significant amount in commissions
    he claims Canadian Solar owes him.

[7]

The parties brought competing motions for summary judgment.

[8]

Canadian Solar moved first seeking the dismissal of the action or, in
    the alternative, judgment against Canadian Solar in favour of Mr. Rossman in
    the amount of $16,560.

[9]

Mr. Rossman brought a cross-motion seeking an order for partial summary
    judgment on his claim for damages for lost wages based on a reasonable notice
    period.

(2)

The motions judges decision

[10]

Canadian Solar raised three issues before the motions judge  the
    applicability of the Entire Agreement Clause in the 2012 Employment Agreement, Mr.
    Rossmans entitlement to commissions, and the enforceability of the Termination
    Clause in the 2012 Employment Agreement. The third issue was also in play on Mr.
    Rossmans cross-motion for summary judgment.

[11]

The motions judge found that the first two issues raised by Canadian
    Solar were not properly addressed in a summary judgment motion and were
    important issues requiring a trial. However, the motions judge granted partial
    summary judgment for Mr. Rossman on the third issue of the enforcement of the
    Termination Clause. He found the Termination Clause to be void and
    unenforceable for the following reasons:

This final sentence [Benefits shall cease 4 weeks from the
    written notice] is clearly either ambiguous as it flies in the face of the
    rest of the provision or it is an attempt to contract out of the minimum
    standards under the
ESA
by limiting benefits to four weeks regardless
    of the term of employment.

[12]

Accordingly, applying common law principles, the motions judge
    determined that Mr. Rossman was entitled to five months reasonable notice of
    his termination.

[13]

Canadian Solar appeals from this component of the motions judges
    decision. It does not say that this issue can only be determined following a
    trial. It does say that the decision is wrong in law.

C.

issue

[14]

There is a single issue on this appeal: did the motions judge err by
    holding that the Termination Clause was void and unenforceable?

D.

analysis

[15]

In my view, the motions judge did not err. The Termination Clause was
    void at the outset, which alone suffices to dispose of the appeal. Even if that
    were not the case, the Termination Clause contains genuine ambiguity, and is
    therefore void and unenforceable.

(1)

Leading umbrella cases in employment law

[16]

Before engaging with the substance of the appeal, the fundamental
    principles underpinning employment law bear repeating. The issue raised in this
    appeal is an important one. It is of personal significance to Mr. Rossman, and
    it is of central importance to employees, who need to know with certainty when
    an employer may terminate their employment:
Machtinger v. Hoj Industries
    Ltd.
, [1992] 1 S.C.R. 986, at pp. 990-91.

[17]

At common law, there is a longstanding presumption that an employer
    cannot terminate employment without reasonable notice. This presumption is
    rebutted if the contract of employment clearly specifies some other period of
    notice, whether expressly or impliedly:
Machtinger
, at p. 998. To
    rebut this presumption, in Ontario, employers and employees are free to
    contractually agree to any notice period, provided the agreement respects the
    minimum standards stipulated in the
ESA
. Explaining this point, Laskin
    J.A. emphasized that if the contractual notice period runs afoul of the
ESA
,
    then the presumption is not rebutted, and the employee is entitled to
    reasonable notice of termination:
Wood v. Fred Deeley Imports Ltd.
,
    2017 ONCA 158, at para. 16. Should that occur, an employee would be entitled to
    pay in lieu of notice for the reasonable period under the common law:
Andros
    v. Colliers Macaulay Nicolls Inc.
, 2019 ONCA 679, at para. 18;
Amberber
    v. IBM Canada Ltd.
, 2018 ONCA 571, at para. 40.

[18]

The
ESA
specifies the minimum employment standards that
    employers are obligated to follow: ss. 1(1), 5(1), and 57. Unless a provision
    provides a greater benefit to an employee, parties cannot contract out of
    these employment standards:
ESA
, s. 5(2); see also
Andros
, at
    para. 19. As this court has stressed repeatedly, if a provision within a
    termination clause conflicts with the minimum standards prescribed by the
ESA
,
    it is not open to this court to simply strike out the offending provision. In
    that situation, the entire termination clause is void. If even one provision
    contravenes the
ESA
and fails

to [substitute] a greater
    benefit, that alone will render the termination clause void and unenforceable:
Wood
, at para. 21;
Andros
, at para. 20.

[19]

This point is a central consideration in the present appeal because it
    concerns an employment contract for an indefinite period. On that basis, the
    Termination Clause must be read together with s. 57(h) of the
ESA
,
    which stipulates that employees are entitled to a notice period of eight weeks
    for employment of eight years or more, to determine its validity and
    enforceability. I will return to this point in my reasons below.

[20]

It is well-established, as Laskin J.A. reiterated in
Wood
, that
    courts interpret employment agreements differently from other commercial
    agreements: at para. 26. There are significant reasons for this distinction.

[21]

First, work is a vital aspect of the human condition. Dickson C.J.
    captured its fundamental import in
Reference re Public Service Employee
    Relations Act (Alberta)
, [1987] 1 S.C.R. 313, at p. 368:

Work is one of the most fundamental aspects in a persons life,
    providing the individual with a means of financial support and, as importantly,
    a contributory role in society. A persons employment is an essential component
    of his or her sense of identity, self-worth and emotional well-being.

[22]

Second, employees are most vulnerable at the moment of termination. As
    expressed by Iacobucci J. in
Wallace v. United Grain Growers Ltd.
,
    [1997] 3 S.C.R. 701, at para. 95:

The point at which the employment relationship ruptures is the
    time when the employee is most vulnerable and hence, most in need of
    protection.

[23]

This crucial fact led Laskin J.A. in
Wood
to enunciate several
    considerations relevant to the interpretation and enforceability of a
    termination clause, at para. 28:

·

When employment agreements are made, usually employees have less
    bargaining power than employers. Employees rarely have enough information or
    leverage to bargain with employers on an equal footing.

·

Many employees are likely unfamiliar with the employment
    standards in the
ESA
and the obligations the statute imposes on
    employers. These employees may not seek to challenge unlawful termination
    clauses.

·

The
ESA
is remedial legislation, intended to protect the
    interests of employees. Courts should thus favour an interpretation of the
ESA
that "encourages employers to comply with the minimum requirements of the
    Act" and "extends its protections to as many employees as
    possible", over an interpretation that does not do so.

·

Termination clauses should be interpreted in a way that
    encourages employers to draft agreements that comply with the
ESA
. If
    the only consequence employers suffer for drafting a termination clause that
    fails to comply with the
ESA
is an order that they comply, then they
    will have little or no incentive to draft a lawful termination clause at the
    beginning of the employment relationship.

·

A termination clause will rebut the presumption of reasonable
    notice only if its wording is clear. Employees should know at the beginning of
    their employment what their entitlement will be at the end of their employment.

·

Faced with a termination clause that could reasonably be
    interpreted in more than one way, courts should prefer the interpretation that
    gives the greater benefit to the employee. [Citations omitted.]

[24]

Additional principles guide the court in situations of ambiguity. In the
    present appeal, the parties disagree on whether the Termination Clause is
    ambiguous. The motions judge found that the last sentence of the Termination
    Clause was clearly either ambiguous as it flies in the face of the rest of the
    provision or it is an attempt to contract out of the minimum standards under
    the
ESA
. If the final sentence renders the Termination Clause
    ambiguous, then the
contra proferentem
rule requires this court to adopt
    an interpretation favourable to Mr. Rossman. However, the
contra
    proferentem
rule will only apply if there is genuine ambiguity. Competing
    interpretations alone fail to satisfy this threshold:
Amberber
, at
    para. 45. Rather, the court must undertake an objective analysis of whether at
    least two reasonable interpretations exist:
Amberber
, at para. 45.

(2)

The Termination Clause is void and unenforceable

(a)

Intention to contract out of the
ESA

[25]

I agree with the motions judge that the Termination Clause was void at
    the outset. On its face, the Termination Clause contravened the notice
    provisions of the
ESA
. The appropriate focus of this inquiry is the
    nature of the employment contract at the time of execution. If the Termination
    Clause is not onside with notice provisions  of the [ESA] at the outset, then
    it is void and unenforceable.
Potential violation in the
    future is sufficient
 (emphasis added):
Garreton v. Complete
    Innovations Inc.
, 2016 ONSC 1178, at para. 27.

[26]

The impugned provision in the present appeal states, Benefits shall
    cease 4 weeks from the written notice (the four-week benefits clause). On
    its face, this language flies in the face of the
ESA
.

[27]

Canadian Solar submits that the four-week benefits clause provided Mr.
    Rossman with more generous benefits than those statutorily prescribed if he were
    terminated in the first three years of his employment. In addition, Canadian
    Solar acknowledges that a problem would arise if it had terminated Mr. Rossman
    after four (or more) years of employment. However, Canadian Solar terminated
    Mr. Rossman just under two years after he signed the 2012 Employment Agreement
    and even only three years and nine months after he signed the 2010 Employment
    Agreement. Hence there is no
prima facie
or possible violation of the
    notice periods in the
ESA
.

[28]

In my view, it is not open to this court to save the impugned provision
    of the 2012 Employment Agreement with the benefit of hindsight. As Doherty J.A.
    stated, the Termination Clause must be read as a whole and in the context of
    the circumstances
as they existed when the agreement was
    created
 (emphasis added):
Dumbrell v. Regional Group of Companies
    Inc.
, 2007 ONCA 59, at para. 53.

[29]

Accordingly, it is irrelevant whether the impugned provision accords
    with the minimum employment standards in certain circumstances. The employment
    contract was for an indefinite period. As such, the benefit period needed to
    run for a minimum of eight weeks to comply with the outermost eight-week minimum
    statutory notice period:
ESA
, s. 57(h). It did not. It is therefore
    void and unenforceable.

(b)

The Termination Clause is ambiguous

[30]

The Termination Clause is ambiguous, and the ambiguity is not erased by
    the saving provision.

[31]

In making its submission on this point, Canadian Solar relies heavily on
Amberber
, a case in which this court held that a motion judge erred by
    finding ambiguity in a termination provision. In reaching this decision, relying
    on
Machtinger
, this court said that employment contracts can referentially
    incorporate the minimum notice requirements of employment standards
    legislation, or otherwise take into account later changes to such acts: at
Amberber
,
    para. 53.

[32]

In
Amberber
, the saving provision was, at para. 13:

In the event that the applicable provincial employment standard
    legislation provides you with superior entitlements upon termination of
    employment (statutory entitlements) than provided for in this offer of
    employment, IBM shall provide you with your statutory entitlements in substitution
    for your rights under this offer of employment.

[33]

In the present case, the saving provision is:

In the event the minimum statutory requirements as at the date
    of termination provide for any greater right or benefit than that provided in
    this agreement, such statutory requirements will replace the notice or payments
    in lieu of notice contemplated under this agreement.

[34]

I agree that these two saving provisions are virtually identical. There
    is, however, a crucial difference between the termination clauses in the two
    employment contracts. In the present case, there is this terse and final
    sentence in the Termination Clause: Benefits shall cease 4 weeks from the
    written notice. There is no similar language in the employment contract at
    issue in
Amberber
. Accordingly, the 2012 Employment Agreement
    contains, as the motions judge found, a genuine ambiguity created by the
    duelling language in the Termination Clause  the initial 
ESA
trumps
    language versus the concluding but nothing above 4 weeks language.

[35]

Unlike the rest of the language in the Termination Clause, the four-week
    benefits clause is not future facing, nor does it express an intention to
    conform to the
ESA
. It cannot be the case that the saving provision here
     designed to make the Termination Clause compatible with future changes to the
ESA
 could reconcile a conclusory provision that is in direct
    conflict with the
ESA
from the outset.

[36]

In this regard, the motions judges interpretation of the Termination
    Clause is entitled to deference:
Wood
, at para. 17;
Creston Moly
    Corp. v. Sattva Capital Corp.
, 2014 SCC 53, at para. 54. The motions judge
    properly instructed himself to interpret the Termination Clause as a whole. He
    was attentive to the entire Termination Clause and attempted to reconcile the
    four-week benefits clause with the saving provision. In doing so, he drew an
    important distinction between language in the Termination Clause that respected
    the intention of the
ESA
and terms that indicated an intention to
    contract out of the
ESA
s minimum statutory requirements, namely, the
    four-week benefits clause.

[37]

Finally, I observe that this courts recent decision in
Andros
is directly applicable to the interpretation of the Termination Clause in the
    present appeal. In
Andros
, the motion judge found that the termination
    clause was unclear as to whether the two notice provisions respected the
    minimum statutory requirements: at para. 8. Fairburn J.A. noted that since the
    provisions breached the
ESA
, it was unnecessary for the motion judge
    to consider whether the termination clause was ambiguous. However, she
    addressed the question of ambiguity because the parties raised it. In doing so,
    she determined that the motion judge correctly found that, at best, the clauses
    were ambiguous because the employee would not have known with certainty what
    his entitlements at the end of his employment would be: at para. 31. It is a
    longstanding principle in employment law that Employees should know at the
    beginning of their employment what their entitlement will be at the end of
    their employment:
Wood
, at para. 28.

[38]

As was the case in
Andros
, when Mr. Rossman signed the 2012
    Employment Agreement, he could not have known with certainty whether the
    minimum statutory requirements would apply to the four-week benefits period,
    especially if he were terminated after four (or more) years of employment.
    Accordingly, the final sentence of the Termination Clause is ambiguous and therefore
    void and of no effect.

(3)

Policy rationale

[39]

I make a final observation. Employees need to know the conditions,
    including entitlements, of their employment with certainty. This is especially
    so with respect to an employees termination  a fragile moment of stress and
    uncertainty.

[40]

In this context, saving provisions in termination clauses cannot save
    employers who attempt to contract out of the
ESA
s minimum standards.
    Holding otherwise creates the risk employers will slip sentences, like the four-week
    benefits clause, into employment contracts in the hope that employees will
    accept the terms. This outcome exploits vulnerable employees who hold unequal
    bargaining power in contract negotiations. Moreover, it flouts the purpose of
    the
ESA
 to protect employees and to ensure that employers treat them
    fairly upon termination:
Machtinger
, at pp. 1002-3.

[41]

While employers are entitled to contractually amend the
ESA
s
    notice requirements, as long as they respect the minimum standards, they are
    not entitled to offend them. Employers must have an incentive to comply with
    the
ESA
s minimum notice requirements. They cannot be permitted to
    draft provisions that capitalize on the fact many employees are unaware of
    their legal rights and will often refrain from challenging notice provisions in
    court:
Machtinger
, at p. 1004. Attempting to reconcile the provisions
    of the Termination Clause with the benefit of hindsight runs counter to the
    remedial purpose of the
ESA
.

E.

Disposition

[42]

I would dismiss the appeal. Mr. Rossman is entitled to his costs of the
    appeal which I would fix, in accordance with the agreement of counsel, at
    $12,000, inclusive of disbursements and HST.

Released: JCM DEC 17 2019

J.C. MacPherson
    J.A.

I agree. S.E. Pepall
    J.A.

I agree. P. Lauwers
    J.A.


