The Ontario Court of Appeal has upheld the termination pay clause of an employment contract in Amberber v. IBM Canada Ltd. 2018 ONCA 571 by using a refreshing and common sense approach in overturning the trial judge’s findings.

The clause in question purported to limit entitlement to notice of termination. Notably, it did not limit notice or payment in lieu of notice to the minimum standards set out in the Employment Standards Act (the “Act”). In addition to 11 weeks and three days’ working notice the Plaintiff, Noah Amberber,  received 19.4 weeks of pay in lieu of notice. As Mr. Amberber was effectively a 16-year employee, this amount of notice was greater than he would have received under the Act. However, it was quite likely less the amount he would have been entitled under the common law.

On an application for summary judgment, the trial judge found the clause unenforceable. Specifically, she found the termination clause was ambiguous because it did not clearly set out an intention to deprive the employee of his common law entitlement.

The clause set out a calculation for termination pay, and then specified that this amount “includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law”. Finally, it provided a failsafe that if employment standards legislation provided greater entitlement, the employee would receive that greater entitlement.

The trial judge’s reasoning was, in the words of the Court of Appeal, “strained”. In order to reach her conclusion that the clause was ambiguous, the trial judge deconstructed the clause and parsed it out into three separate, related provisions. Reading the provisions separately, she found that the second of these deconstructed provisions applied to the first deconstructed provision, but not to the third provision. The result was a question of whether the provision purporting to preclude the right to damages at common law applied to the failsafe provision, ensuring the employee received no less than his entitlement under the Act.

Reading the clause in this deconstructed manner created an ambiguity. Consistent with innumerable past decisions, the trial judge resolved the ambiguity in favour of the employee, finding that the clause was ambiguous and unenforceable.

The Court of Appeal overturned the decision, finding there was no ambiguity in the termination clause. Justice Gray, sitting ad hoc and writing for the Court, found the motion judge’s approach “strained to create an ambiguity where none exists”. The clause had to be read and interpreted as a whole. By deconstructing the clause, the trial judge “deviated significantly” from its text.

Interestingly, the Court of Appeal acknowledged that not all the decisions on the issue of the enforceability of termination pay clauses could be easily reconciled (see, for example, Holm v AGAT Laboratories Ltd. 2018 ABCA 23). This decision will hopefully clarify and simplify the law in this area for future cases.


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