Two Words Too Many? Drafting Termination Provisions in an Employment Contract is Delicate Work
October 2022 - 3 min read
A recent decision from the Alberta Court of Appeal offers a good reminder of the care employers need to take when drafting termination provisions.
In Bryant, three employees whose employment was terminated on 60 days’ notice argued they had a contractual entitlement to more than 60 days’ notice based on a term of their employment contracts stating the employer could terminate the contract “upon giving the Employee sixty (60) days or more written notice”. Although the employer argued this meant the employer had discretion to give more than 60 days’ notice, the majority of the Court of Appeal found otherwise, interpreting the contract to mean the employer intended to provide reasonable common law notice of termination, subject to a minimum of 60 days’ notice.
In coming to this conclusion, the majority applied the following principles:
- When interpreting employment contracts, Courts apply interpretive principles that protect employees. This is because of the inherent power imbalance between employers and employees and the significance of work to an individual’s life and well-being.
- When a term in an employment contract can be reasonably interpreted in more than one way, Courts prefer the interpretation that gives the greater benefit to the employee.
- Employment contracts are presumed to contain an implied term requiring an employer to provide reasonable common law notice of termination. To rebut this presumption, an employer must use “clear and unambiguous” language.
Had the contracts simply said the employer could terminate the employees with “sixty (60) days’ written notice”, there was no question that would have been sufficiently clear and unambiguous to remove the employees’ rights to reasonable common law notice. However, the Court found the inclusion of the words “or more” recognized a realistic possibility that more notice would be given, and the presumption of reasonable common law notice was not rebutted.
This case provides a good opportunity to remind employers and employees alike of the three sources of law that apply to an employee’s rights upon termination of their employment: employment standards statutes, the common law, and contract law.
Employment standards statutes set out the minimum entitlements owed to employees by their employers, including upon termination. Employers cannot contract out of these minimum standards. In fact, courts have found that termination provisions that potentially violate the minimum standards set out in employment standards statutes are void, even if the violation does not arise in the situation at hand. The termination provisions in Bryant exceeded the minimum entitlements in Alberta’s Employment Standards Code, which requires employers to provide termination notice of at least eight weeks (i.e., 56 days) for employees who have been employed for ten years or more (and less for employees who have been employed for a shorter period).
Meanwhile, the common law refers to the body of law created by courts and tribunals through their written decisions. An employee’s entitlement to common law reasonable notice on termination may be much greater than the minimum standards set out in employment standards statutes, depending on factors such as the character of their employment, their length of service, their age, and the availability of similar employment, having regard for the employee’s experience, training, and qualifications. Alberta courts have recognized a "rough upper limit" of 24 months for reasonable common law notice. As the Court of Appeal emphasized in Bryant, employers can only limit or remove an employee’s right to reasonable common law notice with clear and unambiguous language in an employment contract.
Valid termination provisions in a written employment contract can limit notice requirements to the statutory minimums or provide notice more generous than the statutory minimums but less than what an employee might be entitled to under the common law. However, an employer must use clear and unambiguous language to do so effectively. As the Bryant decision illustrates, drafting such provisions is easier said than done. Contact Kimberly Precht or any member of Field Law’s Labour + Employment Group for assistance drafting your employment contracts.
Link to decision: Bryant v Parkland School Division, 2022 ABCA 220