An Alberta court recently had the opportunity to consider the question of whether a termination clause was effective to take away an employee’s entitlement to pay in lieu of notice of termination in excess of the minimum set out in the Alberta Employment Standards Code (“Code”). The Plaintiff in this case was a 17 year employee who was terminated without cause. The employer paid her the equivalent of 8 weeks salary, relying on a termination clause in the employment agreement which purported to limit her termination notice to the amount required under the Code. Given her length of service, the employee was entitled to the maximum of 8 weeks.

The Plaintiff sued for wrongful dismissal and applied for summary judgment. The sole issue for the summary judgment application was whether the termination clause barred the Plaintiff’s claim for damages beyond the 8 weeks. The clause in question stated:

In the event that [the employer] terminates your employment without cause, [the employer] will provide the notice or pay in lieu of notice required by the Alberta Employments Standard [sic] Code or other applicable legislation. You are not entitled to any other termination notice, pay in lieu of notice, or other benefits.

The Court considered the termination clause to be “clear, express and unambiguous” and stated that it was “difficult to think of wording that might make the employer’s intention any clearer”. The Court therefore dismissed the Plaintiff’s application, finding that the employer’s defence that the claim was barred by the termination clause had merit, and accordingly the matter should proceed to trial, absent an application by the employer for summary dismissal.

This decision provides helpful guidance to employers, although it is important to note that there is also a significant body of case law invalidating termination provisions. As recognized by the Court in this case, in order for an agreement to exclude an employee’s common law notice, it must be clear and unambiguous. Because section 3 of the Code preserves an employee’s common law rights, merely referring to the notice required under the Code has, in other cases, not been considered sufficient to limit an employee to the minimum notice requirements under the Code. Absent a reference to the specific termination notice sections of the Code (sections 56 and 57) or wording such as “the minimum requirements under the Code”, some decisions have found that similarly-worded termination clauses did not take away the employee’s common law right to reasonable notice, although each case needs to be decided on its individual facts.

This case emphasizes the importance of careful drafting of termination provisions, and shows that if done correctly, an employer can significantly reduce its liability on a termination without cause.

Stangenberg v Bellamy Software, 2016 ABQB 160

http://www.canlii.org/en/ab/abqb/doc/2016/2016abqb160/2016abqb160.pdf

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