



COURT OF APPEAL FOR ONTARIO

CITATION: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158

DATE: 20170223

DOCKET: C62132

Laskin, Feldman and Hourigan JJ.A.

BETWEEN

Julia Wood

Plaintiff (Appellant)

and

Fred Deeley Imports Ltd.

Defendant (Respondent)

Eugene Meehan, Q.C., Daniel A. Lublin and Marc W. Kitay,
    for the appellant

Abdul-Basit Khan and S. Priya Morley, for the respondent

Heard: September 6, 2016

On appeal from the order of Justice Grant R. Dow of the Superior
    Court of Justice, dated April 19, 2016, with reasons reported at 2016 ONSC
    1412, [2016] O.J. No. 2111.

Laskin
    J.A.:


A.

Overview

[1]

The main issue on this appeal is whether a termination clause in an
    employment agreement between the parties is unenforceable because it
    contravenes Ontarios
Employment Standards Act
,
2000
[1]
(ESA).

[2]

The respondent, Fred Deeley Imports, was the exclusive Canadian
    distributor for Harley-Davidson motorcycles, parts, apparel and accessories. In
    April 2007, Deeley hired the appellant, Julia Wood, as a Sales & Event
    Planner. Eight years later, at the end of April 2015, Harley-Davidson Canada entered
    into an agreement with Deeley to buy all of its assets. As a result of the
    buyout, Deeley immediately told all of its employees, including Wood, that
    their employment would terminate on August 4, 2015. By the date of termination,
    Wood had worked for Deeley for eight years and four months. Her last annual
    compensation, including benefits, was approximately $100,000. When her
    employment ended, she was 48 years old.

[3]

Wood signed an employment agreement the day after she started working
    for Deeley in 2007. The agreement contained the termination clause at issue in
    this appeal. In its material parts, the clause provided:

[The Company] is entitled to terminate your employment at any
    time without cause by providing you with 2 weeks notice of termination or pay
    in lieu thereof for each completed or partial year of employment with the
    Company. If the Company terminates your employment without cause, the Company
    shall not be obliged to make any payments to you other than those provided for
    in this paragraph. The payments and notice provided for in this paragraph are
    inclusive of your entitlements to notice, pay in lieu of notice and severance
    pay pursuant to the
Employment Standards Act, 2000
.

[4]

Deeley paid Wood her salary and benefits for her 13 weeks of working
    notice (May 1 to August 4, 2015). Deeley also paid her additional compensation,
    including a lump sum equivalent to eight weeks pay.

[5]

Nonetheless, Wood started an action against Deeley and brought a motion
    for summary judgment. She contended that the entire employment agreement was
    unenforceable, and, in the alternative, that the termination clause was
    unenforceable. She asked for damages equivalent to 12 months notice of
    termination.

[6]

The motion judge dismissed Woods motion and held that both the employment
    agreement and the termination clause were enforceable. But he also held that if
    he was wrong, Wood would be entitled to damages equal to her salary and
    benefits for a reasonable period of notice. In his view, reasonable notice was
    39 weeks (nine months).

[7]

On appeal, Wood renews the arguments she made on her motion. She raises
    the following three issues:

1.

Is Woods employment agreement unenforceable because she signed it after
    she started working and was not provided with fresh consideration?

2.

Does the termination clause contravene the ESA because it excludes
    Deeleys statutory obligation to make benefit contributions during the notice
    period and it does not satisfy Deeleys statutory obligation to pay severance
    pay?

3.

Did the motion judge err by fixing the period of reasonable notice at
    nine months?

[8]

I would give effect to Woods argument on the second issue. I would
    therefore allow her appeal, and declare that she is entitled to damages equal
    to her salary and benefits for nine months.

B.

Issues

(1)

Is Woods employment agreement unenforceable?

[9]

Wood was offered a job with Deeley during a phone call on April 17,
    2007. She accepted the offer over the phone. A representative of Deeley then sent
    her an email outlining the terms of her employment. She cannot recall when she
    received the email, and neither side was able to produce a copy. The motion
    judge, however, found that the employment agreement was received by the
    plaintiff before she started working.

[10]

Wood
    started working for Deeley on April 23, 2007. The next day, April 24, she met
    with a human resources representative and signed various documents, including her
    employment agreement. The employment agreement itself is dated April 17, which
    was the day Wood accepted Deeleys offer of employment over the phone.

[11]

Wood
    submits that her employment agreement is unenforceable. She argues that because
    she signed it after she started working, it would be enforceable only if Deeley
    provided fresh consideration for her willingness to sign it, and Deeley did not
    do so.

[12]

Woods
    submission has no merit. A written employment agreement is not unenforceable
    merely because the employee signs it after starting to work. A written
    employment agreement might well be unenforceable if an employer includes in it
    a material term that was not part of the original employment relationship: see
Holland
    v. Hostopia.com Inc.
, 2015 ONCA 762, 342 O.A.C. 99. But Deeley did not do
    so.

[13]

The
    motion judge inferred that the terms of Woods employment with Deeley were
    contained in the email and that she received the email before she started
    working on April 23, 2007. The motion judges inferences were reasonable. In
    her evidence, Wood never claimed that on April 24, 2007, she was seeing her
    employment agreement for the first time. Nor did she claim that the agreement
    she signed contained any additional material term. The signing the day after
    she started working was no doubt a matter of administrative convenience. Deeley
    did not unilaterally impose a new term of her employment. Fresh consideration was
    therefore not required.

[14]

I
    would not give effect to this ground of appeal.

(2)

Does the termination clause contravene the ESA because it excludes
    Deeleys statutory obligation to make benefit contributions during the notice
    period and it does not satisfy Deeleys statutory obligation to pay severance
    pay?

[15]

At
    common law, an employee hired for an indefinite period can be dismissed without
    cause, but only if the employer gives the employee reasonable notice. In
Machtinger
    v. HOJ Industries Ltd.
, [1992] 1 S.C.R. 986, at p. 998, the Supreme Court
    characterized the common law principle of termination of employment on reasonable
    notice as a presumption, rebuttable if the contract of employment clearly
    specifies some other period of notice.

[16]

Ontario
    employers and employees can rebut the presumption of reasonable notice by
    agreeing to a different notice period. But their agreement will be enforceable
    only if it complies with the minimum employment standards in the ESA. If it
    does not do so, then the presumption is not rebutted, and the employee is
    entitled to reasonable notice of termination.

[17]

Deeley
    and Wood did agree to a different notice period. Thus, the main question on
    this appeal is whether the termination clause they agreed to contravenes the
    ESA. Wood submits that the clause does contravene the ESA because it excludes Deeleys
    statutory obligation to contribute to Woods benefit plans during the notice
    period and does not clearly satisfy Deeleys statutory obligation to pay
    severance pay on termination.

[18]

Before
    dealing specifically with the benefits and severance questions, I will set out
    the full termination clause and the relevant employment standards under the ESA,
    and then review the motion judges decision and the jurisprudence on
    interpreting employment agreements.

(a)

The termination clause and the relevant provisions of the ESA

[19]

The
    termination clause provides:

[The Company] is entitled to terminate your employment at any
    time without cause by providing you with 2 weeks notice of termination or pay
    in lieu thereof for each completed or partial year of employment with the
    Company. If the Company terminates your employment without cause, the
Company shall not be obliged to make any payments to you other
    than those provided for in this paragraph
, except for any amounts which
    may be due and remaining unpaid at the time of termination of your employment.
The payments and notice provided for in this paragraph are
    inclusive of your entitlements to notice, pay in lieu of notice and severance
    pay pursuant to the
Employment
    Standards Act, 2000
. [Emphasis added.]

[20]

An
    employment standard is a requirement or prohibition under the ESA that applies
    to an employer for the benefit of an employee. The following employment
    standards in the ESA are relevant to the interpretation of the termination
    clause
[2]
:

·

As Wood was employed for over eight years, Deeley was required to
    give her at least eight weeks notice of termination (s. 57(h)) (working
    notice);

·

Deeley could give Wood less than eight weeks notice, but only if
    it paid her a lump sum equal to the amount she would have received during the
    eight-week notice period (s. 61(1)(a)) (pay in lieu of notice);

·

Deeley was required to continue to contribute to Woods benefit
    plans during the eight-week period (ss. 60(1)(c) and 60(1)(b));

·

Because Deeley had a payroll of at least $2.5 million, and Wood
    was employed for over five years, Deeley was required to pay Wood severance pay
    on termination (s. 64(1));

·

Deeley was required to pay Wood severance pay equal to one weeks
    salary for every year or part of a year she was employed. Therefore, Deeley was
    required to pay Wood severance pay equal to eight and one-third weeks salary
    (s. 65(1));

·

Deeley could not contract out of these employment standards, and
    any termination clause that did so would be void (s. 5(1));

·

Deeley could provide Wood with a greater benefit than any of the
    employment standards, and if it did so, that employment standard would not
    apply (s. 5(2)). Deeley, in fact, did provide Wood with greater notice than the
    employment standard of one weeks notice for every year of employment.

[21]

In
    summary, Deeleys statutory obligations to give Wood at least eight weeks
    notice of termination of her employment, to continue its contributions to her
    benefit plans during the notice period, and to pay her severance pay of eight
    and one-third weeks salary were employment standards.  Deeley was precluded
    from contracting out of any of these employment standards, unless it
    substituted a greater benefit for Wood. Contracting out of even one of the employment
    standards and not substituting a greater benefit would render the termination
    clause void and thus unenforceable, in which case Wood would be entitled to
    reasonable notice of termination of her employment at common law.

(b)

The motion judges decision

[22]

Wood
    was dismissed without cause. Deeley terminated her employment and the
    employment of all of its other employees because it sold all of its assets.
    Thus, the enforceability of the termination clause became the main issue on the
    summary judgment motion.

[23]

The
    motion judge held that the termination clause was enforceable. He pointed out
    that the clause itself provided Wood with greater notice  18 weeks  than the
    employment standard in the ESA of eight weeks. He also pointed out that Deeley
    had given Wood working notice of 13 weeks, during which time it continued to
    contribute to her benefit plans, and had then given Wood a lump sum payment
    equivalent to eight weeks notice, for a total of 21 weeks of combined notice
    and pay in lieu of notice.

[24]

Finally,
    the motion judge noted that in
Roden v. Toronto Humane Society
(2005)
, 202 O.A.C. 351, this court
    upheld a termination clause, even though the clause did not refer to the
    employers obligation to continue its contributions to the employees benefit
    plans during the notice period.

(c)

The jurisprudence on interpreting employment agreements

[25]

The
    question of the enforceability of the termination clause turns on the wording
    of the clause, the purpose and language of the ESA, and the jurisprudence on
    interpreting employment agreements. That jurisprudence is now well-established.
    I will summarize it briefly.

[26]

In
    general, courts interpret employment agreements differently from other
    commercial agreements. They do so mainly because of the importance of
    employment in a persons life. As Dickson C.J.C. said in an oft-quoted passage
    from his judgment 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.

[27]

As
    important as employment itself is the way a persons employment is terminated.
    It is on termination of employment that a person is most vulnerable and thus is
    most in need of protection: see
Wallace v. United Grain Growers Ltd.
,
    [1997] 3 S.C.R. 701.

[28]

The
    importance of employment and the vulnerability of employees when their
    employment is terminated give rise to a number of considerations relevant to
    the interpretation and enforceability of a termination clause:

·

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:
Machtinger
, p.
    1003

·

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:
Machtinger
,
    p. 1003

·

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:
Machtinger
, p. 1003.

·

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:
Machtinger
, p. 1004.

·

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:
Machtinger
, p. 998.

·

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:
Ceccol v. Ontario Gymnastics Federation
(2001), 149 O.A.C. 315,
Family Counselling Centre of Sault Ste. Marie and
    District
(2001), 151 O.A.C. 35.

(d)

Does the termination clause contravene the ESA because it excludes
    Deeleys statutory obligation to contribute to Woods benefit plans during the
    notice period?

[29]

Woods
    compensation included a base salary, an incentive bonus, and contributions by
    Deeley to two benefit plans: a health and dental plan and a registered
    retirement savings plan (RRSP).

[30]

In
    her last year of employment, Woods annual base salary was $81,041.48. She was
    entitled to an annual incentive bonus of up to 14 percent of her base salary.
    Deeleys contributions to Woods health and dental plan were valued at $538.55
    monthly, and Deeley contributed an amount equal to nine percent of Woods
    salary to her RRSP ($7,196 in 2014). Wood also received a clothing allowance
    and was entitled to 18 days vacation. In her last full year of employment,
    Woods total taxable income was $101,020.24.

[31]

When
    Woods employment was terminated, she was given 13 weeks working notice (May 1
    to August 4, 2015). During that 13-week period, Deeley paid her base salary and
    made its required contributions to her health and dental plan. At the end of
    the 13-week period, Deeley paid Wood the following additional amounts:

·

$13,778, which was equal to eight weeks salary, and which Deeley
    claimed was compensation for Woods entitlement to severance pay under the ESA
    and any remaining entitlement under the termination clause;

·

$7,131, which was a pro-rated amount (for January to July) for
    her 2015 annual incentive bonus;

·

A payment for accrued and unused vacation pay; and

·

A payment for outplacement services.

[32]

Deeley
    also offered to pay Wood an additional $12,470, if she signed a release. That
    figure consisted of an RRSP contribution of $7,376 and a further pro-rated
    incentive bonus of $5,094 (for August to December 2015). But Wood refused to
    sign a release and therefore did not receive that payment.

[33]

If
    one looks at the termination clause itself, together with the actual payments
    Deeley made (or offered to make), Wood received more compensation than she
    would have received under the ESA. The termination clause provided for more
    than twice as much notice as the employment standard under the ESA  18 weeks,
    instead of 8 weeks. Wood received a total of 21 weeks salary (13 weeks
    working notice plus a lump sum payment for eight weeks), which was more than
    the 16.3 weeks salary she was entitled to under the ESA for notice (8 weeks)
    and severance pay (8.3 weeks). Deeley made contributions to Woods health and
    dental plan throughout the 13 weeks of working notice and offered to make its
    annual contribution to her RRSP (in exchange for signing a release).

[34]

Nonetheless,
    Wood contends that the termination clause is unenforceable because the clause expressly
    excludes Deeleys statutory obligation to contribute to Woods benefit plans
    during the notice period. Deeleys contributions to Woods health and dental
    plan and her RRSP formed part of her compensation package. Thus, Wood argues,
    the termination clause contravenes ss. 60 and 61 of the ESA and, under s. 5(1),
    is void.

[35]

In
    support of her argument, Wood makes two specific submissions. First, Deeleys voluntary
    contributions or offer to contribute to Woods benefit plans after giving her
    notice her employment was being terminated cannot remedy an otherwise
    unenforceable termination clause. The enforceability of the clause stands or
    falls on its own wording, not on what Deeley may have done during the notice
    period or after Woods employment was terminated. Second, this courts decision
    in
Roden
should be distinguished because of the different wording of
    the termination clause in that case.

[36]

In
    response, and to support the enforceability of the termination clause, Deeley
    makes the following three submissions. First, the phrase two weeks notice of
    termination or pay in lieu thereof in the termination clause is broad enough
    to include both base salary and Deeleys benefit contributions for the notice
    period. Second, contrary to Woods position, Deeley says that what it paid Wood
    on termination is relevant to the enforceability of the termination clause
    because Deeley paid Wood more than she would have been entitled to under the
    ESA. Third, and also contrary to Woods position, Deeley says the motion
    judges interpretation of the termination clause is consistent with this
    courts decision in
Roden
.

[37]

I
    agree with Woods submissions and for that reason find the termination clause
    unenforceable. I would summarize my conclusion as follows. Woods compensation
    included Deeleys contributions to her two benefit plans. Under ss. 60 and 61
    of the ESA, Deeley was required to continue to make those contributions during
    the notice period. Its obligation to do so was an employment standard under the
    ESA. Yet the termination clauses wording excludes and therefore contracts out
    of that obligation.

[38]

The
    termination clause gives Wood two weeks notice of termination or pay in lieu
    thereof for every year or partial year of employment. It says nothing about
    benefit contributions. The clause then goes on to state that on termination,
    the Company shall not be obliged to make any payments to you other than those
    provided for in this paragraph, and the payments and notice provided for in
    this paragraph are inclusive of your entitlement to notice, pay in lieu of
    notice and severance pay pursuant to the [ESA]. On its plain wording, the
    clause excludes Deeleys obligation to contribute to Woods benefit plans
    during the notice period. I will now address the parties specific submissions.

(i)

Does the termination clause implicitly provide that Deeley will
    contribute to Woods benefit plans during the notice period?

[39]

Deeley
    submits that though the termination clause does not expressly require it to
    continue to contribute to Woods benefit plans during the notice period, we can
    read this obligation into the wording of the clause. Deeley argues that the
    word pay  in the phrase two weeks notice of termination or pay in lieu
    thereof  is broad enough to include both base salary and benefits.

[40]

This
    argument cannot succeed. An employer and an employee can contract out of common
    law reasonable notice, but they must do so in clear and unambiguous language.
    The word pay does not clearly include both salary and benefits. At best for
    Deeley the word is ambiguous. I would therefore interpret pay as referring
    only to salary or wages, not to benefits. That interpretation is consistent
    with the consideration I referred to earlier: where the language of a
    termination clause is unclear or can be interpreted in more than one way, the
    court should adopt the interpretation most favourable to the employee:
Ceccol
.

(ii)

Do Deeleys contributions or its offer to contribute to Woods benefit
    plans after giving Wood notice of termination affect the enforceability of the
    termination clause?

[41]

Deeley
    did contribute to Woods health and dental plan for 13 weeks after giving her
    notice of termination, and it offered to make its annual contribution to her
    RRSP (though conditional on a release). The motion judge relied on Deeleys
    payments made during the notice period to uphold the enforceability of the
    termination clause. At para. 15 of his reasons, he wrote:

There is no evidence that the defendant did not continue to
    make the requisite premium payments on behalf of the plaintiff. For example,
    there is no evidence that the plaintiff submitted a claim during her working
    notice which was rejected on the basis she no longer had coverage.

[42]

Deeley
    argues that the motion judges analysis and interpretation are reasonable and
    we should defer to his holding. I do not accept this argument.

[43]

The
    motion judges interpretation of a contractual provision  other than a
    provision in a standard form contract  is now entitled to deference from an
    appellate court: see
Sattva Capital Corp. v. Creston Moly Corp.
, 2014
    SCC 53, [2014] 2 S.C.R. 633. But no deference is owed if the motion judge made
    an error of law that can be extricated from the judges interpretation of the
    contractual clause in question. And that is the case here. The motion judge
    made an extricable error of law in holding that Deeleys actual contributions
    to Woods benefit plans were material to the interpretation of the termination
    clause. Its contributions on termination should have no bearing on whether the
    termination clause itself contravenes the ESA. The wording of the clause alone
    must be looked at to decide whether it contravenes or complies with the ESA.

[44]

That
    the enforceability of the termination clause depends only on the wording of the
    clause itself, and not on what the employer may have done on termination, is
    implicit in the judgment of Iacobucci J. in
Machtinger
, explicit in
    the ESA, consistent with the considerations governing the interpretation of
    employment agreements, and supported by at least two decisions of the Ontario Superior
    Court of Justice. I will elaborate on these four points.

[45]

First,
    nothing in
Machtinger
suggests that an employers conduct on
    termination, or during the notice period, can remedy an otherwise illegal and
    unenforceable termination clause. Instead, Iacobucci J. states, at p. 1004, [I]f
    an employment contract fails to comply with the minimum statutory notice
    provisions of the Act, then the presumption of reasonable notice will not have
    been rebutted.

[46]

Second,
    the ESA itself is perhaps more explicit. An employers obligation to continue
    its contributions to an employees benefit plans during the notice period is an
    employment standard (ss. 60-61), and s. 5(1) of the ESA states expressly that
    an employer cannot contract out of, or waive, an employment standard. In other
    words, an employers later compliance with an employment standard  here,
    Deeleys contributions to Woods benefit plans  cannot cure the termination
    clauses exclusion of the employers obligation to contribute to those benefit
    plans during the notice period.

[47]

Third,
    allowing employers to rely on their conduct at the time of termination of
    employment would also be inconsistent with one of the important considerations
    governing the interpretation of termination clauses: these clauses should be
    interpreted in a way that encourages employers to draft agreements to comply
    with the ESA. If employers can always remedy illegal termination clauses by
    making payments to employees on termination of employment, then employers will
    have little incentive to draft legal and enforceable termination clauses at the
    beginning of the employment relationship: see
Machtinger
, p. 1004.

[48]

Finally,
    two well-reasoned Superior Court decisions reject the argument that an
    employers later compliance with its statutory obligations can affect the
    interpretation of a termination clause in an employment agreement: the decision
    of Low J. in
Wright v. Young and Rubicam Group of Cos. (Wunderman)
,
    2011 ONSC 4720, [2012] C.L.L.C. 210-018; and the decision of Leach J. in
Stevens
    v. Sifton Properties Ltd.
, 2012 ONSC 5508, 5 C.C.E.L. (4th) 27.

[49]

In
Wright
, Low J. held that the termination clause was void because it
    precluded the continuation of benefit contributions during the notice period. The
    employer had actually complied entirely with its obligations under the ESA to
    make contributions to the employees benefit plans. Low J. held, however, that
    its compliance was irrelevant. In a passage I agree with, she wrote, at para.
    16:

The fact that the defendant continued benefits for the
    statutory notice period under the Act does not change the meaning of the
    language used in the agreement stipulating that the payments under the
    termination provision are to be inclusive of all  entitlements to
    compensation.

[50]

Similarly,
    in
Stevens
, Leach J. held that even though the employer had provided
    the employee with all of his statutory entitlements, the termination clause was
    still unenforceable because it precluded the continuation of benefit
    contributions during the notice period. In Leach J.s opinion, the employers
    later voluntary compliance with its statutory obligations did not remedy the
    illegality of the termination clause. In a passage with which I also agree,
    Leach J. wrote, at para. 65:

Employers should be provided with incentive to ensure that their
    employment contracts comply with
all
aspects of the employment
    standards legislation, including provision of adequate notice (or pay in lieu
    thereof)
and
mandated benefit continuation.
As
    emphasized by Justice Low in
Wright
,
supra
, an employer's voluntary provision of additional benefits
    after the fact does not alter the reality that the employment contract drafted
    by the employer is contrary to law.
[Italics in original; underlining
    added.]

[51]

For
    these reasons, Deeleys actual contributions to Woods benefit plans during the
    notice period cannot affect the enforceability of the termination clause. Its
    enforceability or unenforceability depends on whether the termination clause itself
    included or excluded Deeleys obligation to make those contributions.

(iii)

Does this courts decision in
Roden support
    the enforceability of the termination clause?

[52]

The
    last basis on which Deeley seeks to uphold the motion judge is this courts
    decision in
Roden
. Wood, however, says that the case is
    distinguishable because of the different wording of the termination clause in
Roden
.
    I agree.

[53]

In
Roden
, the termination clause in issue stated that the employer, The
    Toronto Humane Society, could terminate the employment of the plaintiff Roden
    upon providing the Employee with the minimum amount of advance notice or
    payment in lieu thereof as required by the applicable employment standards
    legislation: see para. 55. Roden made the same argument as Wood: the
    termination clause contravened the ESA and was void because it failed to
    include The Toronto Humane Societys obligation to continue its contributions
    to Rodens benefit plans during the notice period.

[54]

Gillese
    J.A., writing for the panel, rejected this argument. In her view, the termination
    clause was simply silent about The Toronto Humane Societys obligation to
    continue to contribute to Rodens benefit plans. The clause did not contract
    out of an employment standard and thus was not void. She wrote, at para. 62:

The without cause provisions in question are of precisely the
    type that Iacobucci J. says are valid:  they referentially incorporate the
    minimum notice period set out in the
Act
. The without cause provisions
    do not attempt to provide something less than the legislated minimum standards;
    rather, they expressly require the Society to comply with those standards. As I
    have said, in my view, the provisions do not purport to limit the Societys
    obligations to payment of such amounts. That is, they do not attempt to
    contract out of the requirement to make benefit plan contributions. Because the
    contracts are silent about the Societys obligations in respect of benefit plan
    contributions, the Society was obliged to  and did  comply with the
    requirements of the Act in that regard.

[55]

The
    difference between
Roden
and this case lies in the wording of each
    termination clause. In
Roden
, the clause dealt only with The Toronto
    Humane Societys obligation to give the notice of termination, as required by
    the ESA, or to pay Roden a lump sum for the notice period. It did not exclude
    The Toronto Humane Societys additional obligation to continue to contribute to
    Rodens benefit plans during the notice period. It said nothing about that
    obligation.

[56]

In
    this case, by contrast, the termination clause is not merely silent about
    Deeleys obligation to contribute to Woods benefit plans during the notice
    period. It uses language that excludes that obligation: the payments Deeley
    agreed to make are the
only payments
Wood is
    entitled to; they are inclusive of her entitlements under the ESA.

[57]

The
    all inclusive language in Woods termination clause, and its absence in
    Rodens termination clause, is what distinguishes the two cases. Deeley limited
    its obligations on the termination of Woods employment to the payments
    specified in the termination clause. And those payments did not include its
    required contributions to Woods two benefit plans during the notice period.
    The termination clause is therefore void and unenforceable.

[58]

And,
    because the clause is void, it cannot be used as evidence of the parties
    intention. It would therefore be wrong to infer that the parties would have
    intended to substitute for the void termination clause, a clause that complied
    with the ESA:
Machtinger
, at pp. 1001-2.

[59]

Holding
    that the termination clause contravenes the ESA because it excludes Deeleys
    obligation to contribute to Woods benefit plans is sufficient to decide this
    appeal. Nonetheless, I will consider the more difficult question whether the
    clause also contravenes the ESA because it does not satisfy Deeleys statutory
    obligation to pay severance pay.

(e)

Does the termination clause contravene the ESA because it does not satisfy
    Deeleys statutory obligation to pay severance pay?

[60]

As
    Wood worked for Deeley for eight years and four months, under s. 65(1) of the
    ESA, Deeley was required to pay Wood severance pay equivalent to her salary for
    8.3 weeks. On termination, Deeley paid Wood a lump sum equivalent to eight
    weeks salary, which it characterized as her severance pay. Deeley now concedes
    that it paid her less than she was entitled to under the ESA. But as I said in
    discussing Deeleys benefit contributions, what Deeley may have voluntarily paid
    Wood on termination has no bearing on whether the termination clause itself is
    enforceable. Its enforceability depends on what it required Deeley to pay Wood.

[61]

However,
    the severance pay issue differs from the benefit contributions issue. The
    termination clause does not refer to Deeleys obligation to contribute to
    Woods benefit plans during the notice period, and indeed excludes that
    obligation. In contrast, the termination clause refers to and includes Deeleys
    obligation to pay severance pay. The question on this appeal is whether it does
    so in a way that complies with the ESA.

[62]

The
    termination clause required Deeley to give Wood two weeks notice of
    termination or pay in lieu thereof for each year or partial year of employment.
    These payments and notice were inclusive of [Woods] entitlements to notice,
    pay in lieu of notice and severance pay. In my view, drafted in this way, the
    clause does not satisfy Deeleys statutory obligation to pay severance pay.
    Deeley could fulfil its obligations under the clause in ways that would deprive
    Wood of her statutory severance pay. The termination clause is thus
    unenforceable, and Wood is entitled to common law reasonable notice.

[63]

Under
    the ESA, an employers obligation to give an employee notice, or pay instead of
    notice, and its obligation to pay an employee severance pay are separate
    obligations. So, under the ESA, Wood was entitled to eight weeks notice of
    termination (or pay instead), and severance pay of 8.3 weeks salary. If Deeley
    had drafted the termination clause to reflect these separate obligations, the
    clause would be enforceable. For example, the clause would be enforceable if it
    provided: Deeley is entitled to terminate your employment  by providing you
    with one weeks notice of termination or pay in lieu thereof for each completed
    or partial year of employment, and severance pay equal to one weeks salary for
    each completed or partial year of employment.

[64]

But
    in the termination clause, Deeley combined its separate obligations. Doing so raises
    problems with the clauses enforceability. The problems arise because there are
    three ways in which Deeley could meet its obligations under the clause, and
    only one of those three ways would clearly satisfy its obligation under the ESA
    to pay severance pay.

[65]

First,
    Deeley could have given Wood a lump sum payment equal to 18 weeks salary (pay equal
    to 2 weeks notice for every completed or partial year of employment  9 x 2
    weeks salary). Under this scenario, Wood would have received pay instead of
    notice
and
the severance pay she was entitled to
    under the ESA. In fact, Wood would have received slightly more than the ESA
    minimums  18 weeks salary, instead of 16.3 weeks.

[66]

Second,
    Deeley could have given Wood working notice of 18 weeks. Under this scenario,
    Wood would receive more notice than she was entitled to under the ESA, but she
    would not receive any severance pay.

[67]

Third,
    Deeley could do what it actually did and give Wood a combination of working
    notice and a lump sum payment. Depending on how much working notice it gave, Wood
    may or may not receive the severance pay she was entitled to under the ESA. In
    this case, Deeley gave Wood 13 weeks notice. Under the termination clause, it
    was required to give her a further lump sum payment of five weeks salary (18
    minus 13). But a lump sum payment of five weeks is less than the severance pay
    of 8.3 weeks she was entitled to under the ESA. Thus under this scenario, Wood
    would not receive enough severance pay. If, however, Deeley had given Wood nine
    weeks notice of termination and a lump sum payment equal to nine weeks
    salary, then Wood would receive the severance pay, to which she was entitled.

[68]

In
    summary, Deeley could fulfil its obligations under the termination clause it
    drafted in one of three ways. One of those ways would give Wood the severance
    pay she was entitled to under the ESA. One would not. And the other may or may
    not, depending on how much working notice Deeley gave Wood.

[69]

Thus,
    the clause allowed Deeley not to pay Wood her statutory severance pay, or to
    pay her less severance pay than she was entitled to under the ESA. And from
    Woods perspective, when she signed her employment agreement she would not know
    whether she would receive her statutory severance pay if her employment ended.
    As the termination clause did not clearly satisfy Deeleys obligation to pay
    Wood her statutory severance pay, the clause is unenforceable, and Wood is
    entitled to reasonable notice of the termination of her employment at common
    law.

(3)

Did the motion judge err by fixing the period of reasonable notice at
    nine months?

[70]

The
    motion judge correctly recognized that if either the employment agreement as a
    whole, or the termination clause, was unenforceable, then Wood would be
    entitled to damages equal to a period of reasonable notice at common law. He
    fixed the notice period at 39 weeks (nine months). Wood submits that he erred
    in doing so. She contends that the appropriate period of notice is 12 months
    and that we should substitute 12 months for the motion judges determination of
    nine months.

[71]

I
    would not give effect to Woods submission. The motion judges figure of nine
    months took account of the relevant factors and was within a reasonable range.
    And even though he found the agreement enforceable and thus did not need to
    determine reasonable notice, his determination is still entitled to deference
    on appeal.

[72]

In
    finding that the period of reasonable notice was nine months, the motion judge
    took into account the well-established
Bardal
[3]
factors: the character of Woods employment, her length of her service, her age,
    and the availability of similar employment in the light of her experience,
    training, and qualifications. The motion judge also noted Woods submission that
    though her position was clerical  she had no managerial duties  her high
    income together with her age would make it more difficult for her to find a
    new, but comparable job. Indeed, Woods evidence was that over a nine-month
    period, she had applied for 65 positions and received only six interviews, none
    of which resulted in employment.

[73]

The
    motion judge considered the case law presented by both parties on comparative
    dismissals, relied on the case law submitted by Wood, and concluded that a
    reasonable range of notice was 8.5 to 11 months. Within that range, he chose
    nine months.

[74]

Is
    his determination of nine months entitled to deference from this court, or are
    we free to substitute our own figure? Our court has recognized two kinds of
    cases: cases where a trial or motion judge concludes that a plaintiff is
    entitled to reasonable notice, but errs in principle in calculating the notice
    period; and cases such as this one, where a trial or motion judge concludes
    wrongly that a termination clause excluding reasonable notice is enforceable,
    but still goes on to fix a reasonable notice period.

[75]

This
    courts decision in
Minott v. OShanter Development Co.

Ltd.
(1999),
    42 O.R. (3d) 321 (C.A.) is an example of the first kind of case. There, the
    trial judge found that the plaintiff was entitled to reasonable notice of his
    dismissal, but she made two errors in principle in determining the notice
    period. Still, this court did not interfere with the trial judges
    determination. Instead, at pp. 343-4, we held that we should ordinarily defer to
    the trial judges determination, as long as it was within a reasonable range:

If the trial judge erred in principle, an appellate court may
    substitute its own figure. But it should do so sparingly if the trial judges
    award is within an acceptable range despite the error in principle.

[76]

This
    courts recent decision in
Holland
,
    referenced above,
is an example of the second kind of case. There,
    the trial judge had dismissed the plaintiffs wrongful dismissal action on the
    ground that his employment contract  which limited notice to the minimum
    statutory standard  was enforceable. Nonetheless, the trial judge addressed
    the issue of reasonable notice, for completeness, and concluded that were it
    not for the termination provision in the employment agreement, the plaintiff
    would have been entitled to eight months notice at common law.

[77]

On
    appeal, this court overturned the trial judge on the enforceability of the
    termination provision and held that it was unenforceable. And though the trial
    judges determination of reasonable notice was not necessary to his decision,
    Strathy C.J.O., writing for the panel, applied
Minott
and upheld eight
    months notice because it was within a reasonable range.

[78]

In
    the present case, as in
Holland
, the motion judge determined the period
    of reasonable notice for completeness. Doing so was not necessary to his
    decision because he found the employment agreement enforceable. Following
Holland
,
    the motion judges determination is still entitled to deference. As I cannot
    say that nine months was outside a reasonable range, I would defer to the
    motion judges determination. I would therefore not give effect to this ground
    of appeal.

C.

Conclusion

[79]

The
    termination clause in Woods employment agreement contravenes the
Employment
    Standards Act, 2000
for two reasons. First, it excludes Deeleys statutory
    obligation to contribute to Woods benefit plans during the notice period.
    Second, it does not satisfy Deeleys statutory obligation to pay severance pay.
    On either ground the clause is unenforceable. Wood is entitled to reasonable
    notice of termination or the equivalent in damages. The motion judges award of
    nine months notice was within a reasonable range, and I would defer to it.

[80]

I
    would allow Woods appeal, set aside the order of the motion judge, and in its
    place declare that the termination clause in Woods employment agreement is
    unenforceable. Wood is entitled to reasonable notice of nine months or pay
    instead of reasonable notice.

[81]

Wood
    is also entitled to her costs of the motion and of the appeal. I would fix the
    costs of the motion at $14,000, and the costs of the appeal at $25,000, each
    amount inclusive of disbursements and applicable taxes.

Released: February 23, 2017 (J.L.)

John Laskin J.A.

I agree. K. Feldman J.A.

I agree. C.W. Hourigan J.A.


APPENDIX A

Employment Standards
    Act, 2000
, S.O.
    2000, c. 41

5.
(1)
Subject to subsection (2), no employer or agent of
    an employer and no employee or agent of an employee shall contract out of or
    waive an employment standard and any such contracting out or waiver is
    void.

(2)
If one or more
    provisions in an employment contract or in another Act that directly relate to
    the same subject matter as an employment standard provide a greater benefit to
    an employee than the employment standard, the provision or provisions in the
    contract or Act apply and the employment standard does not apply.

57.

The notice of
    termination under section 54 shall be given,



(h) at least eight weeks before the termination, if the
    employees period of employment is eight years or more.

60.
(1)

During
    a notice period under section 57 or 58, the employer,

(a) shall not reduce the employees wage rate or alter
    any other term or condition of employment;

(b) shall in each week pay the employee the wages the
    employee is entitled to receive, which in no case shall be less than his or her
    regular wages for a regular work week; and

(c) shall continue to make whatever benefit plan
    contributions would be required to be made in order to maintain the employees
    benefits under the plan until the end of the notice period.



(3)

If an employer fails to contribute to a benefit plan contrary
    to clause (1) (c), an amount equal to the amount the employer should have
    contributed shall be deemed to be unpaid wages for the purpose of section
    103.



61.
(1)

An
    employer may terminate the employment of an employee without notice or with
    less notice than is required under section 57 or 58 if the employer,

(a) pays to the employee termination
    pay in a lump sum equal to the amount the employee would have been entitled to
    receive under section 60 had notice been given in accordance with that section;
    and

(b) continues to make
    whatever benefit plan contributions would be required to be made in order to
    maintain the benefits to which the employee would have been entitled had he or
    she continued to be employed during the period of notice that he or she would
    otherwise have been entitled to receive.



64.
(1)

An
    employer who severs an employment relationship with an employee shall pay
    severance pay to the employee if the employee was employed by the employer for
    five years or more and,

(a) the severance occurred because of a permanent
    discontinuance of all or part of the employers business at an establishment
    and the employee is one of 50 or more employees who have their employment
    relationship severed within a six-month period as a result; or

(b) the employer has a payroll of $2.5 million or
    more.



65.
(1)

Severance
    pay under this section shall be calculated by multiplying the employees
    regular wages for a regular work week by the sum of,

(a) the number of years of employment
    the employee has completed; and

(b) the number of months of employment not included in
    clause (a) that the employee has completed, divided by 12.







[1]
S.O. 2000 c. 41.



[2]

See Appendix A for the full text of the relevant provisions of
    the ESA.



[3]

Bardal v. Globe and Mail Ltd.
(1960), 24 D.L.R. (2d) 140, at para. 21 (Ont. H.C.J.).


