



COURT OF APPEAL FOR ONTARIO

CITATION: Waksdale v. Swegon North America
    Inc., 2020 ONCA 391

DATE: 20200617

DOCKET: C67616

Pepall, Hourigan and Roberts
    JJ.A.

BETWEEN

Benjamin Waksdale

Plaintiff

(Appellant)

and

Swegon North America Inc.

Defendant

(Respondent)

Philip R. White and Jason K. Wong, for
    the appellant

Landon Young and Amanda Boyce, for the
    respondent

Heard: in writing

On
    appeal from the order of Justice Edward M. Morgan of the Superior Court of
    Justice, dated October 3, 2019, with reasons reported at 2019 ONSC 5705.

REASONS FOR DECISION

Introduction

[1]

The appellant sued the respondent for wrongful
    dismissal and moved for summary judgment, arguing that he was entitled to
    damages because the respondent did not provide him with reasonable notice of
    dismissal.

[2]

The primary issue on the motion was the legal
    effect of the written employment contract between the parties. The appellant
    took the position that the termination clause in his employment contract was
    void because it was an attempt to contract out of the minimum standards of the
Employment
    Standards Act
, 2000
, S.O. 2000, c. 41 (the 
ESA
). The
    respondent conceded that the Termination for Cause provision in the contract
    was void because it violated the
ESA
. However, it argued that the
    Termination of Employment with Notice provision in the agreement was valid
    and, because it was not alleging cause, it could rely on the latter provision.

[3]

The motion judge dismissed both the motion for
    summary judgment and the appellants action, and awarded the respondent $16,000
    for costs of the action. He concluded that the Termination of Employment with
    Notice provision is a stand-alone, unambiguous, and enforceable clause.

[4]

In our view, the motion judge erred in law in
    his interpretation of the employment contract. The termination provisions are
    unenforceable because they violate the
ESA
. Therefore, we allow the
    appeal, set aside the motion judges order, and order that the matter be
    remitted to the motion judge to determine the quantum of the appellants
    damages.

Analysis

[5]

The appellant began his employment with the
    respondent on January 8, 2018 as a director of sales. His total income was
    approximately $200,000 per annum. The respondent terminated the appellant
    without cause on October 18, 2018 and paid the appellant two weeks pay in lieu
    of notice.

[6]

The respondent conceded on the motion that the
    Termination for Cause provision in the employment contract breached the
ESA
.
    Likewise, the appellant acknowledged that the Termination of Employment with
    Notice provision complied with the minimum requirements of the
ESA
.
    Therefore, the issue for the motion judge was the discrete question of whether
    the illegality of the Termination for Cause provision rendered the Termination
    of Employment with Notice provision unenforceable.

[7]

The law regarding the interpretation of
    termination clauses in employment contracts was helpfully summarized by Laskin
    J.A. at para. 28 of
Wood v. Fred Deeley Imports Ltd.
, 2017 ONCA 158, 134
    O.R. (3d) 481. The following points from that summary are particularly apt for
    the purposes of this appeal:

·

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.

[8]

Laskin J.A. went on to observe that the
    enforceability of a termination provision in an employment contract must be
    determined as at the time the agreement was executed. The wording of the
    contract alone should be considered in deciding whether it contravenes the
ESA
,
    not what the employer might have done on termination:
Wood
, at paras,
    43-44.  Thus, even if an employers actions comply with its
ESA
obligations on termination, that compliance does not have the effect of saving
    a termination provision that violates the
ESA
.

[9]

In the present case, there is no question that
    the respondent would not be permitted to rely on the Termination for Cause
    provision. The issue is whether the two clauses should be considered separately
    or whether the illegality of the Termination for Cause provision impacts the
    enforceability of the Termination of Employment with Notice provision. The
    respondent submits that where there are two discrete termination provisions
    that by their terms apply to different situations, courts should consider
    whether one provision impacts upon the other and whether the provisions are
    entangled in any way. If they are not, the respondent argues, then there is
    no reason why the invalidity of one should impact on the enforceability of the
    other.

[10]

We do not give effect to that submission. An
    employment agreement must be interpreted as a whole and not on a piecemeal
    basis. The correct analytical approach is to determine whether the termination
    provisions in an employment agreement read as a whole violate the
ESA.
Recognizing the power imbalance between employees and employers, as well as the
    remedial protections offered by the
ESA
, courts should focus on
    whether the employer has, in restricting an employees common law rights on
    termination, violated the employees
ESA
rights. While courts will
    permit an employer to enforce a rights-restricting contract, they will not
    enforce termination provisions that are in whole or in part illegal.  In
    conducting this analysis, it is irrelevant whether the termination provisions are
    found in one place in the agreement or separated, or whether the provisions are
    by their terms otherwise linked. Here the motion judge erred because he failed
    to read the termination provisions as a whole and instead applied a piecemeal
    approach without regard to their combined effect.

[11]

Further, it is of no moment that the respondent
    ultimately did not rely on the Termination for Cause provision. The court is
    obliged to determine the enforceability of the termination provisions as at the
    time the agreement was executed; non-reliance on the illegal provision is
    irrelevant.

[12]

The mischief associated with an illegal
    provision is readily identified. Where an employer does not rely on an illegal
    termination clause, it may nonetheless gain the benefit of the illegal clause.
    For example, an employee who is not familiar with their rights under the
ESA
,
    and who signs a contract that includes unenforceable termination for cause
    provisions, may incorrectly believe they must behave in accordance with these
    unenforceable provisions in order to avoid termination for cause. If an employee
    strives to comply with these overreaching provisions, then his or her employer
    may benefit from these illegal provisions even if the employee is eventually
    terminated without cause on terms otherwise compliant with the
ESA
.

[13]

In the alternative, the respondent relies on a
    severability clause in the employment contract which reads as follows:

You agree that if any covenant, term,
    condition or provision of this letter outlining the offer of employment with
    the Company is found to be invalid, illegal or incapable of being enforced by a
    rule of law or public policy, all remaining covenants, terms, conditions and
    provisions shall be considered severable and shall remain in full force and
    effect.

[14]

We decline to apply this clause to termination
    provisions that purport to contract out of the provisions of the
ESA
.
    A severability clause cannot have any effect on clauses of a contract that have
    been made void by statute:
North v. Metaswitch Networks Corporation
,
    2017 ONCA 790, 417 D.L.R. (4th) 429, at para. 44. Having concluded that the Termination
    for Cause provision and the Termination of Employment with Notice provision are
    to be understood together, the severability clause cannot apply to sever the offending
    portion of the termination provisions.

Disposition

[15]

The motion judges order is set aside. The only
    defence the respondent had to the action and the motion for summary judgment
    was its reliance on the Termination of Employment with Notice provision.
    Accordingly, we order that the matter be remitted to the motion judge to
    determine the quantum of the appellants damages and the costs of the action.
    If the parties cannot agree on the costs of the appeal, they may file written
    submissions together with a bill of costs within ten days of the release of these
    reasons. Those submissions shall be no more than three pages in length.

S.E. Pepall J.A.

C.W. Hourigan J.A.

L.B. Roberts J.A.


