Court rejects motion to determine enforceability of employment termination clause prior to trial

Enforceability of termination clause a relatively minor issue that could be dealt with at trial

Court rejects motion to determine enforceability of employment termination clause prior to trial

The Ontario Superior Court has dismissed a terminated employee’s motion seeking a ruling that the termination clause in her employment contract was unenforceable.

In Donaghy v. Seasons Retirement Communities, 2021 ONSC 6197, the plaintiff began working with the defendant on a part-time basis in 2010. She became a full-time employee and signed an employment contract in 2012. The employment contract contained a termination clause limiting her entitlements upon termination without cause to the minimum statutory entitlements under the Employment Standards Act, 2000

In September 2020, the defendant terminated with cause the plaintiff's employment under the ESA. Since the termination was for just cause, the defendant did not provide the plaintiff with any notice of termination or pay in lieu of the notice. The plaintiff filed an action for wrongful dismissal.

The plaintiff brought a motion pursuant to Rule 21.01(1)(a), seeking a determination of a question of law prior to trial, specifically that the termination clause was unenforceable because it excluded her entitlements to benefit continuation during the minimum statutory notice period and therefore, provided less than the minimum standards under the ESA. The defendant contended that the motion should be dismissed since determining issues on the enforceability of a termination clause would involve not only a pure question of law but also a question of mixed fact and law.

In its decision, the Superior Court held that Rule 21 motion was not the appropriate mechanism available to the plaintiff. The court said determining the enforceability of a termination clause in an employment contract, like the present case, was fundamentally an issue of contractual interpretation, which is a question of mixed fact and law.

“Contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to words of a written contract, considered in light of the factual matrix,” the court explained.

The court stressed that in assessing whether the termination clause violated the ESA, it must be determined whether said clause implied that the plaintiff would receive any notice of termination or pay in lieu of the notice. As such, the issue of whether the termination clause was unenforceable, the court noted, would necessarily depend on the interpretation of the employment contract, considered in light of the factual matrix.

The court also found that the motion would not dispose any part of the action, substantially shorten the trial or save costs. Determining enforceability of the termination clause would not require any additional evidence or witness than beyond what would otherwise be adduced at trial, the court said.

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