Gone in 60 Days (or More): Court of Appeal Finds Termination Clause did not Limit Employee Termination Entitlements

Stikeman Elliott LLP

Stikeman Elliott LLP

The Alberta Court of Appeal recently reviewed the enforceability of a termination clause that purported to impose limits on employee termination entitlements. In Bryant v. Parkland School Division, the Court held that a provision that entitled an employee to 60 days of termination notice or more did not unambiguously limit the employee’s termination entitlements. Three employees subject to the provision were therefore able to claim reasonable notice well above the 60-day period, in accordance with the common law.

The Facts

Three long-term employees of Parkland School Division were terminated without cause, each receiving 60 days’ notice. All three were subject to the same termination provision, which stated:

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 employees brought an action claiming notice above and beyond the 60-day period in accordance with the common law requirement of reasonable notice. The chambers judge summarily dismissed the employees’ claim, finding that the clause was unambiguous as it provided a fixed level of notice, while allowing the employer to give more notice at their discretion.

The Decision

The majority of the Alberta Court of Appeal allowed the employees’ appeal, finding that the contract was not sufficiently clear, unequivocal and unambiguous to remove or limit the presumed common law right of the employees to reasonable notice.

In interpreting the clause, the majority was guided by the following principles:

  • different principles of contract interpretation apply in the employment context as opposed to other commercial contracts. This recognizes the power imbalance inherent in the employment relationship, and the limited opportunity of employees to negotiate contractual terms;
  • interpretive principles have evolved to protect employees. One such principle is that, faced with a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee; and
  • employment contracts are presumed to contain an implied term requiring an employer to provide reasonable common law notice of dismissal. Only where the employment contract unambiguously limits or removes that right will the presumption be rebutted, and the implied term ousted.

With these principles as guidance, the majority found that the clause at issue did not clearly fix the employees' notice entitlement and did not impose an upper limit on the amount of notice an employee was entitled to receive. Rather, the inclusion of the words "or more" recognized a longer notice period as a realistic possibility.

The majority also disagreed with the chamber judge’s conclusion that the employer had given itself the discretion to decide the amount of notice owing to an employee. The Court of Appeal found that another, more reasonable, interpretation is that the employer intended the notice period to be in accordance with common law standards, subject to a minimum notice period of 60 days. The interpretation more favourable to the employee therefore prevailed.

Significance of the Decision and Takeaways for Employers

The Parkland decision serves as an important reminder that employers must diligently review their employment contracts to ensure they are compliant with employment standards legislation, current with case law, and clear and unambiguous to effectively rebut the presumption of reasonable common law notice.

It is worth noting that the majority of the Alberta Court of Appeal stated that if the clause contained only the words “60 days” rather than “60 days or more”, it would be “abundantly clear that [the employer] had fixed its notice at 60 days", limiting the employee’s entitlement to additional common law notice. This statement reinforces the view that parties need not expressly waive an employee’s common law entitlements but can do so by implication using a fixed or formulaic entitlement. Specifically, the Court of Appeal’s decision provides some comfort to employers with termination notice provisions that do not have language such as “or more” or “at least”, but rather a set amount of notice that is at or above the minimum amount of notice required by employment standards legislation.

The authors would like to acknowledge the support and assistance of Ashley Murray, summer law student.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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