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How Ontario’s Waksdale Decision Will Impact Employers in Atlantic Canada (Hint: It might be time to update your employment contracts!)

1 September 2020 by Ben Currie and Jennifer Weston

A recent decision, Waksdale v Swegon North America Inc., 2020 ONCA 391 (“Waksdale”), has Ontario employers scrambling to update their employment contracts.  Should employers in Atlantic Canada follow suit?

Each province has unique employment standards legislation, but two major features of the Waksdale approach to interpreting termination provisions may prove influential:

  1. Contract language that defines just cause as conduct that falls short of the “wilful misconduct” standard required by Ontario’s employment standards legislation is void.  It is uncertain whether relying on the common law definition of just cause would invalidate the provision. Previous cases have found “wilful misconduct” is a higher standard than “just cause”.
  2. Termination provisions should be interpreted together as a whole.  Where part of a termination clause is made void by legislation, a severability provision cannot save the rest of the termination clause. 

How will termination provisions referring to the “Just Cause” standard be upheld in contracts in Atlantic Canada now?

New Brunswick’s Employment Standards Act applies the standard “cause for dismissal,” which has been interpreted to mean the same as the just cause standard at common law.  Therefore, contracts that refer to just cause meet the minimum requirements under NB legislation. 

Prince Edward Island’s Employment Standards Act uses “just cause” language, so PEI employers need not worry about multiple definitions!  

Newfoundland and Labrador’s Labour Standards Act refers to “wilful refusal to obey a lawful instruction,” “neglect of duty that adversely affects the employer’s interests,” and “material breach of employment contract.”  The courts have interpreted these standards as being equivalent to just cause at common law.  

The Nova Scotia Labour Standards Code language, similar to Ontario, creates uncertainty.  Section 72 refers to “wilful misconduct or disobedience or neglect of duty that has not been condoned by the employer…” Unlike in Ontario, no decisions have identified a difference between just cause and wilful misconduct. Nova Scotia courts have only addressed the relationship indirectly.  In Deagle v Shean Co-Operative Ltd, 1996 NSCA 217, in an appeal of a decision where Labour Standards found no evidence of wilful misconduct, the Court of Appeal prevented the employer from raising a defence of just cause, stating the question had “already been decided.”  In doing so, they did not distinguish between “just cause” and “wilful misconduct,” which may imply they consider the two standards to be the same.  The NS Labour Board also uses the terms interchangeably, often citing the common law definition of “just cause” when considering the section 72 standard. 

Given the above, it is probably unlikely Nova Scotia courts will suddenly decide “just cause” language does not meet employment standards, but the law is always evolving.  Waksdale may prompt a deeper consideration of section 72 “wilful misconduct” and its definition.  if you have questions about this, we can help you assess and update your current employment contract templates to prepare for this possibility. 

How will Waksdale impact the severability of termination provisions that are non-compliant? 

Employers must be aware that if any part of a termination clause fails to meet minimum standards, employers may be required to apply common law standards to the termination – sometimes at significant expense.  Mr. Waksdale’s employment contract contained separate termination provisions and a severability clause.  The Ontario Court of Appeal read the termination provisions as a whole and stated that they should not be applied in a piecemeal approach without regard to their combined effect, adding, “it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.”

The reason?  Termination clauses should be interpreted in a way that encourages employers to draft lawful clauses at the beginning of employment.  Even though the employer did not rely on the termination for cause provision, they benefited because the employee was led to believe it was enforceable. 

This reasoning on severability will likely be applied in Atlantic Canada. Waksdale is a good reminder to ensure employment contract language complies with employment standards legislation.