CANADA Law and Practice Contributed by: Christopher Pigott, Rachel Younan, Jacob Wagner and Felisha Jagiah, Fasken
7.4 Termination Agreements It is permissible for employment contracts in Canada to contain express termination clauses that govern the parties’ rights and obligations on termination. These clauses may be agreed to either prior to or after the termination of the employment relationship. Con - tractual termination clauses are legally enforceable so long as the provisions do not violate mandatory statutory minimums, including notice periods or pay in lieu of notice requirements. In this regard, it is of note that the Ontario Court of Appeal has found that an unenforceable “for cause” termination clause that violated the Ontario Employment Standards Act 2000 invalidated the contract, resulting in the awarding of common law damages rather than the limited termina - tion entitlements provided for in the contract. In Quebec, however, civil law provides that an employ - ee may not renounce in advance their right to obtain an indemnity where insufficient notice of termination is given. Therefore, a court would not be bound by a contractual termination clause that would have been agreed at the beginning of the employment relation - ship and where – given the given nature of the employ - ment, the specific circumstances in which it is carried on and the duration of the period of work – the ter - mination notice previously agreed upon has become unreasonable. Full and Final Releases Contractual termination clauses often include “full and final” releases. Under such a release, an employee relinquishes all legal claims against the employer relat - ed to their employment in exchange for some form of consideration from the employer (typically, a defined payment or number of payments). Obtaining a release from an employee upon termination does not guaran - tee that an employee will not commence a future claim against an employer. Rather, the validity of any release signed by an employee who subsequently commenc - es a wrongful dismissal action (or other claim related to their employment) is a determination to be made by an adjudicator. A release may specifically limit an employee’s entitle - ment to reasonable notice and expressly set out the required period of notice or payment to be made in lieu thereof. A release will only be found to be enforce -
conduct that the employer has previously condoned to establish just cause. Upon termination for cause, employers should advise employees of the reasons for termination and record those reasons in the termination letter. If challenged, employers will generally be required to prove each reason relied upon before an adjudicator will find just cause for termination. Canadian courts have held that it is an implied term of an employment contract that an employer may terminate an employee for cause without any notice. As a result, an employer will not be required to provide an employee with notice of ter - mination or pay in lieu of notice where the employer In most jurisdictions, non-unionised employees may challenge a termination for cause by commencing either a civil action or a claim provided for through a statutory mechanism. In civil actions, employees will claim that the employer did not have just cause to terminate their employment without notice and, as such, that they were wrong - fully dismissed. Employees will seek damages for the notice that would have been required if the employer had terminated the employee without asserting just cause. The employer bears the onus of proving cause for termination. asserts just cause for termination. Civil Actions and Statutory Claims By contrast, in a statutory claim, an employee will generally only be entitled to receive their minimum statutory entitlements if just cause is not established. In some jurisdictions, such as Quebec, an employee credited with two years of uninterrupted service could also be reinstated in their employment and compen - sated for any lost wages if the employer does not meet its burden of proving that the termination was made for just cause. In unionised workplaces, employees must resort to grievance arbitration. If an employer is unable to establish just cause, the employee will – in most instances – be reinstated and compensated for any lost wages.
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