Words That Really Matter

Employers take note: the contents of the Employment Standards Act can trump the commercial certainty sought in an express notice

Employers want written employment agreements. Why? Because written agreements are expected to provide greater commercial certainty.

Here’s what is at play in the game of written employment contracts: The notice owed in order to lawfully end employment will often vary hugely from an unwritten to a written agreement.

Without a written agreement or written termination formula, the basis for calculating notice owed to the dismissed employee to lawfully terminate an employment is reasonable notice.

Reasonable notice will often be calculated in terms of months of notice, even for short-term employments, and can range above two years of notice in appropriate cases.

A typical written employment agreement will contain wording intended to specifically limit the employee’s entitlement to notice to something often much less than reasonable notice. A written notice formula contained in an employment contract is called express notice. If express notice exists in a binding and enforceable employment contract, the employee will not be entitled to reasonable notice, but instead will be entitled to the described express notice.

A common wording formula for express notice will refer somehow to the Employment Standards Act, and attempt to link the employees’ notice entitlement to the limitations specified in that act. If the express notice wording works, the results can be very satisfactory for the employer, and downright shocking for the employee compared to reasonable notice.

The maximum entitlement to notice under the act is calculated in weeks, not months. So, written employment agreements containing such express notice wording are designed to turn the tables on the employee, substituting express notice calculated in weeks for reasonable notice typically calculated in months. In this way, the employer achieves commercial certainty of how much notice must be given to lawfully bring employment to its end.

However, there is a problem for the employer.

The Employment Standards Act contains within it wording that can defeat the commercial certainty being sought by the express notice formulas described above.

In a recent Alberta Court of Appeal decision, an express notice formula was worded as follows: “... the company reserves the right to terminate your employment at any time. Should you be terminated for cause, then you will not be entitled to any advance notice of termination or severance pay in lieu thereof. Should you be terminated for reasons other [than] cause, then you will be entitled to advance notice or severance pay thereof in accordance with the Employment Standards [Code] of Alberta.”

This is a common formula often seen and used in B.C. as well in reference to the province’s Employment Standards Act.

In the Alberta case, the employer dismissed the employee and relied on the express notice formula above. The employee sued for wrongful dismissal. The trial court threw out the employee’s claim, ruling he was bound by what he signed, and that what he signed limited his entitlement to notice to that described in the employment standards legislation. The employee appealed that trial court decision. The Court of Appeal overturned the trial court and ruled that based on the wording of the express notice formula and the employment standards legislation, the employee was able to make a claim for reasonable notice beyond that described in the express notice formula.

The B.C. Employment Standards Act has wording very similar to the Alberta Employment Standards Code. Both have wording that preserves claims for notice above and beyond the limitations of the legislation. In fact, a recent B.C. Supreme Court decision, the Macaraeg decision referred to in my last column, specifically ruled that the Employment Standards Act preserves the right to sue for breach of contract, or to bring any action existing at common law, even if a similar substantive right is conferred by the Employment Standards Act.

To further compound employer difficulties, a recent B.C. Court of Appeal decision ruled that specific contractual termination payments decided by the wording in express notice provisions are not limited by the concept of employment standards calculation for notice owed.

This was decided by the Court of Appeal, in part based on the wording in the Employment Standards Act that allows claims to be made above and beyond its limitations.

So what is the upshot?

First, the actual wording of the express notice formula is crucial in determining whether the employee is limited to the notice described by it or not.

Second, relying on the Employment Standards Act to contain all the devices that will allow the employer to limit notice is a risky proposition, given the recent state of court decisions on point.

Third, just because an employment agreement contains an express formula is no reason to automatically conclude that proper notice has been fully defined by that express formula.

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