Of Floors and Ceilings: Appeal Court Interprets Contract

Written by Daniel Standing LL.B., Editor, First Reference Inc.

Clarity of language is perhaps the most important part of writing a good contract. In the employment world, the slightest uncertainty in a termination provision can and often does lead to costly litigation to determine how much money should change hands. In 2022 ABCA 220 (CanLII), the Court of Appeal of Alberta helped the parties interpret a provision providing for “60 days or more” notice of termination, holding that the ambiguity inherent in it meant that it should be interpreted in the employee’s favour.

Background

The appeal was brought by three appellants who worked in information technology in the school system for between 10 and 15 years. When they were terminated without cause, they each received 60 days’ notice under a term of their contracts which read,

“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.”

Affidavit evidence from one of the employees and from one of the drafters of the contract was similar; they said that the clause was intended to set a minimum of notice, not a ceiling, and that the amount of notice would increase the longer their employment continued.

As a matter of interpretation, the case turned on the ambiguity of the contract clause. The judge who first considered the matter held that there was no ambiguity. He held that in fixing the notice at 60 days, the contract gave the employer the discretion to provide additional notice. He also held that when a contract clearly addresses termination, there is no applicable common law right to reasonable notice.

The appellate decision

The Court of Appeal disagreed, stating there were various ways the contract provision could be interpreted, meaning it did not rise to the required “high level of clarity” required to displace the presumption that common law notice would apply.

The court noted that the provision did not state that common law notice was to be ousted, and it did not explicitly fix the employees’ notice entitlement. Furthermore, the contract language imposed no upper limit on the amount of notice an employee could receive, and it did not state that 60 days was the limit. The court said that by including the words “or more,” the parties recognized that a period that was longer than 60 days was contemplated as a realistic possibility.

There were ways the contract could have been clearer. For example, the court said the employer could have explicitly said that it had the discretion to determine the notice period, or it could have simply fixed notice at 60 days. As it stood, the contract was capable of being interpreted such that common law notice would continue to apply beyond the 60 days. This opened the door for two interpretive principles to apply.

First, the court noted that in employment law, because of the difference in the bargaining power of the parties, any ambiguity should be resolved in favour of the employee. Second, there is a presumption of an implied term requiring the employer to give common law reasonable notice to the employee on termination.

The bottom line: by failing to clearly oust common law notice in the contract, the employer was held liable for it.

Key takeaways

Clear, precise, unambiguous: this is what the employer should strive for in its employment contracts. If there is more than one way to interpret what an employment contract says, it will probably be resolved in favour of the employee. Therefore, particular caution is required when drafting termination clauses, particularly if the employer wishes to specify how much notice will be payable on termination rather than leaving the matter to the application of common law principles.