Be Careful When Drafting Termination Clauses


That’s the lesson from a recent Ontario Superior Court case.

The plaintiff was hired by the defendant on November 28, 2005 for the position of full-time receptionist and was promoted to the position of Executive Assistant in 2008 at an annual salary of $36,000. Her employment was terminated on November 28, 2008 at which time she was presented with a severance package that provided, in part as follows:

You will receive an additional five months pay in lieu of notice of termination as per our obligations under the Employment Standards Act of Ontario.

The Employment Standards Act would have provided the plaintiff with only 3 weeks pay, significantly less than 5 months pay. The plaintiff signed and accepted the terms of the offer. A few days later the plaintiff attended at the workplace to return some property of the employer at which time she was advised that there was a mistake in the offer.

The plaintiff was told that she “… would only be receiving three weeks’ termination pay. The plaintiff was asked to sign a release which she did not do.”

The question was whether there was an enforceable agreement that the plaintiff could enforce?

The Court found that such a contract existed:

The letter represented the employer providing consideration it owed to the employee. In the absence of any demonstrated intention of the employer to deal separately with its common law obligations, the submission that the letter was intended to deal only with the statutory obligations of the employer cannot stand. The letter was to be the completion of the contract. It represented not only the fulfillment of the employer’s statutory obligations, but also its effort to conclude its common law responsibility to provide reasonable notice or pay in lieu of that notice. The acceptance of the letter would represent the completion of all the employer’s obligations. ….

So, the lesson is clear. Take time to review the terms of any termination letter or, for that matter, any offer. Any contract requires that three things be present (1) an offer, (2) acceptance and (3) consideration. Someone mentioned to me yesterday the master carpenter’s motto “measure twice, cut once”. That can be modified to fit the employment model as well. For a more detailed discussion of terminations generally, including termination clauses, see this post on my blog, Thoughts from a Management Lawyer.

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