BC court upholds termination clause in employment contract
In Forbes v. Glenmore Printing Ltd., 2023 BCSC 25, the Supreme Court of BC had to consider the validity of a termination clause in an employment contract. In this case, the terminated employee was arguing that the termination clause was invalid and therefore he was entitled to reasonable notice at common law.
The employee argued the termination clause was invalid because it only required notice or payment of lieu that matched the individual termination provisions in section 63 of the Employment Standards Act (ESA). Specifically, the termination clause said:
[the employer] may terminate this Agreement by giving the Employee,
(a) After the first three months of continuous employment, one week’s notice or wages,
(b) After the first year of continuous employment, two weeks’ notice or wages, and
(c) After three consecutive years of employment three weeks’ notice or wages, plus one additional week’s notice or wages for each additional year of employment to a maximum of eight weeks’ notice or wages.
The employee argued that this clause potentially violated the ESA because it did not account for the possibility that he could be terminated pursuant to the group termination provisions in section 64 of the ESA. Those provisions in section 64 required additional notice or payment in lieu of notice in certain circumstances of group terminations.
The court first concluded that section 63 (the individual termination requirements) established the statutory minimum requirements that are needed for an employer to avoid the common law entitlement to reasonable notice.
The court next concluded that the termination clause did not say that the employee would not receive his statutory entitlement in circumstances other than in section 63. The court concluded that the employer was still bound by the group termination requirements in section 64, so the clause was not going to breach the ESA. This was an important difference when compared to other cases relied on by the employee, where a potential future breach of the ESA rendered a clause invalid.
In the result, the court dismissed the case against the employer, and ordered that the employee to pay costs to the employer.
Employers should have written employment agreements in place to achieve some certainty when terminating employees. Also, employers should have their employment contracts reviewed by legal counsel periodically because each year there are cases that shed light on how certain wording will be interpreted. Employment agreements therefore need to be updated periodically to maximize their enforceability and achieve some certainty for terminations.