Invalid "For Cause" Termination Language Voids Entire Termination Provision

In a decision released last week, the Court of Appeal for Ontario held an employer could not rely on a valid and enforceable “without cause” provision in an employment agreement where the agreement included a “for-cause” provision that violated Ontario’s Employment Standards Act, 2000 (“ESA”).

The Court of Appeal would not “sever” the invalid provision, despite the agreement containing an enforceable term stating any invalid provision should effectively be ignored (a “severability” clause). Instead, the court held the two termination provisions must be read together, such that, if one was invalid, they both were. The court was also not moved by the fact the employment relationship was terminated without cause – that is, the employer never sought to rely on the invalid, for-cause provision in the first place.

This is the most recent ruling in a string of Ontario decisions in which courts have taken a very restrictive approach to interpreting any employment agreement provision that may limit an employee’s termination entitlements.

It remains to be seen whether the court’s reasoning will be followed by other courts moving forward. Until then, the decision is a strong reminder for employers to review their employment agreements regularly to ensure compliance with the current (fluctuating) state of employment law in Ontario.

Click here for the Briefing Note.