For as long as I’ve been practicing employment law, my #1 piece of advice to employers has been, “Use proper employment agreements”. It’s simple advice which, sadly, still has not penetrated much of the employer community.
Employment Agreements
Why bother using employment agreements when hiring employees? There are many reasons but – from the perspective of an employer-side lawyer – the primary benefit is that they (should) contain binding language limiting the employee’s working notice (or pay in lieu) entitlement upon termination.
Why is that beneficial to employers? Because, in the absence of a termination clause, the employee may be entitled – pursuant to the common law - to as much as 24 months' prior notice or pay in lieu. With a proper termination clause in place, the employee’s entitlement may be limited to the statutory minimum (which, in B.C., is a maximum of 8 weeks).
The Age-Old Debate
So, what’s the age-old debate? As always when it comes to lawyers, the devil is in the details and the debate is all about the wording necessary to oust that common law entitlement and limit the employee’s termination entitlement to the statutory minimum (or some other amount exceeding the statutory minimum).
Lawyers representing employees regularly assert that a termination clause stating that the employee’s entitlement is as set out in the B.C. Employment Standards Act is not sufficient, and that further wording is necessary to oust the common law entitlement. Lawyers (such as me) representing employers scoff at that assertion and insist that bare language incorporating the statutory entitlement is all that’s necessary.
B.C.’s Court of Appeal Weighs In
A recent decision of B.C.’s Court of Appeal may put this debate to rest… for now (lawyers are a stubborn bunch and are prone to re-arguing seemingly decided points of law). In Egan v. Harbour Air Seaplanes LLP, this province’s highest court found in favour of employers, stating that a bare termination clause was “sufficiently clear to rebut the presumption of common law reasonable notice.”
In that instance, Mr. Egan had signed an employment agreement containing the following termination wording. (As the decision arose in the aviation context, the governing statute was the Canada Labour Code, not the B.C. Employment Standards Act.)
“The Harbour Air group may terminate your employment at any time without cause so long as it provides appropriate notice and severance in accordance with the requirements of the Canada Labour Code.”
That’s what I call a “bare” termination clause. Lawyers for employees would say it was not sufficient and, to be enforceable, should have said something along the lines of…
“The Harbour Air group may terminate your employment at any time without cause so long as it provides appropriate notice and severance in accordance with the requirements of the Canada Labour Code. Your entitlements to notice and/or severance upon termination are governed solely by this agreement and not by the common law.”
This is indicative of the type of mindset a legal education imposes upon people; it is apparently not sufficient to say what something is… you have to also say what it isn’t. As in, “the object in front of me is a tree; it isn’t a dog.” One might think that identifying what something is would be sufficient, but in law…
In the Egan matter, the Court restated the principle that the default entitlement to common law notice or pay in lieu can be rebutted.
[24] There is a presumption at common law that an employer cannot terminate an employee without providing “reasonable notice”. That presumption is rebuttable “if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly”: Machtinger at 998.
And, the Court recognized the age-old debate on this topic and set out the question in issue.
[27] Whether termination clauses that do no more than referentially incorporate statutory provisions into an employment contract are sufficiently clear to displace the common law presumption of reasonable notice appears to be a matter of some controversy across Canada. …
[28] In this province, decisions following Wong have concluded that termination clauses providing for notice “in accordance with” or “as required under” the B.C. ESA are sufficiently clear to rebut the presumption and are therefore enforceable: see Miller, Brown and Bailey. …
[31] There is no question that parties may displace the presumption of reasonable notice through a provision in a contract of employment that clearly specifies “some other period of notice”. There is also no question that the intention of the parties to do so must be expressed clearly and unambiguously: Machtinger at 998; Nemeth at para. 8. The more precise question in this appeal is whether a termination clause that referentially incorporates statutory notice provisions but does not expressly limit an entitlement to the minimum statutory notice (i.e., does not convert the statutory floor to a ceiling) clearly specifies “some other period of notice”.
Ultimately, the Court concluded that the “bare” variety of termination clause – of the type which appeared in Mr. Egan’s employment agreement – is sufficient.
[60] … A termination clause that clearly evinces an intention to incorporate the notice provisions of the applicable employment standards legislation into the parties’ contract, which provide for “some other period of notice”, should be sufficient to displace the presumption. In such circumstances it may properly be said that the parties have made a contract of employment which clearly specifies some other period of notice, thereby displacing the presumption as per Machtinger. …
[63] In this case, the Termination Clause requires Harbour Air to give Mr. Egan “appropriate notice and severance in accordance with the requirements of the Canada Labour Code”. This language clearly incorporates the notice requirements in s. 230(1) and the severance requirements in s. 235(1). … In my opinion, there is no ambiguity in the parties’ intentions to displace common law notice with the statutory requirements of the Code. I therefore conclude that the Termination Clause is sufficiently clear to rebut the presumption of common law reasonable notice.
In effect, the Court embraced the view that stating what something is will be sufficient and that going on to state what isn’t won’t be required. That’s – from the perspective of employers – a positive development. In B.C., at least, this age-old debate seems to be resolved. For now.
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This item is provided for general information purposes only and is not intended to be relied upon as legal advice. Informed legal advice should always be obtained about your specific circumstances.