Choose Your Words Carefully – ABCA Finds an Employer’s Termination Clause to be Ambiguous
When an employer chooses to terminate an employee without cause, it generally must provide the employee with reasonable notice of termination.
Reasonable notice may be provided via working notice or pay in lieu of notice. Each province’s employment standards legislation outlines the minimum amount of notice or pay in lieu of notice that an employee is entitled to, based on their length of service. However, in addition to the employment standards minimums, an employee may also be entitled to claim greater notice (or pay in lieu) under the common law.
An employer may attempt to limit or completely extinguish an employee’s common law entitlement so that an employee is limited to only the minimum requirements set out in a province’s employment standards legislation. However, it requires careful drafting to do this correctly, and there are many cases in which employers’ attempts are found insufficient.
In the recent decision of Bryant v Parkland School Division, 2022 ABCA 220 (“Bryant”), the Alberta Court of Appeal analyzed one such termination clause which attempted to limit the employees’ entitlements and found it to be ambiguous. Accordingly, the employees were entitled to claim for additional notice under the common law.
Facts
In Bryant, three long-term employees (the “Employees”) signed a standard form employment contract drafted by their employer (“Parkland”).
On June 2, 2014, Parkland terminated the Employees without cause, and each received 60 days’ notice. The Employees brought an action claiming notice above and beyond the 60 day period, claiming entitlement to common law reasonable notice.
Bryant ultimately turned on the interpretation of the wording of the termination clause in the contracts which read as follows:
“This contract may be terminated by the Employee by giving to the Board thirty (30) days or more prior written notice, and by the Board upon giving the Employee sixty (60) days or more written notice.”The Chambers Judge’s Analysis
The Employees argued that the termination clause was ambiguous and unenforceable because it did not allow them to ascertain how much notice in excess of 60 days they may receive.
However, the Chambers Judge determined that on a plain reading, the termination clause provided for a fixed level of notice (60 days) for all employees, and allowed Parkland to give a greater amount of notice at the employer’s discretion. The Chambers Judge therefore concluded that the common law does not imply a right to reasonable notice when a contract unambiguously addresses termination, and that this termination clause clearly and unequivocally set a fixed minimum notice period.
As such, the Chambers Judge found that the inclusion of the words “or more” in the termination clause did not render the clause ambiguous and unenforceable.
The Alberta Court of Appeal’s Analysis
The Employees appealed the decision of the Chambers Judge. The Alberta Court of Appeal began its analysis by confirming the legal presumption that every employment contract has an implied term requiring an employer to provide reasonable common law notice when an employee is terminated without cause. Only where an employment contract unambiguously limits or extinguishes that right will the presumption be rebutted, and the implied term found not to apply. The Court of Appeal determined that the Chambers Judge failed to begin his analysis with this interpretive principle and that he therefore reached the wrong conclusion about the termination clause.
By applying this principle, the Court of Appeal found that the termination clause did not unambiguously limit the Employees’ right to common law reasonable notice for the following reasons:
- It did not clearly fix the employees’ notice entitlement;
- It did not impose an upper limit on the amount of notice the employees were entitled to receive; and,
- It did not suggest that 60 days was the maximum notice to which the employees were entitled.
On the contrary, the termination clause explicitly provided that an employee could be entitled to more notice. The inclusion of the words “or more” recognized a longer notice period as a realistic possibility.
Finally, the Court of Appeal questioned the Chambers Judge’s conclusion that Parkland had given itself the discretion to decide the amount of notice owing to an employee. The Court of Appeal stated that if that was intended, Parkland could have written the contract to clearly say so. A more reasonable interpretation was that Parkland intended the notice period to be in accordance with common law standards, subject to a minimum notice period of 60 days.
As a result, the Court of Appeal allowed the Employees’ appeal, and held that each was entitled to reasonable notice in accordance with the common law.
Takeaways
Bryant serves as a reminder to always use proper language when drafting termination clauses in employment contracts. A termination clause must be sufficiently clear, unequivocal, and unambiguous to extinguish or limit an employee’s presumed common law right to reasonable notice.
McLennan Ross can provide legal advice to companies and individuals as it relates to the drafting of employment agreements. Please reach out to our Labour and Employment Practice Group with any questions.
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