Determining an appropriate notice period upon termination is often a source of conflict in the area of employment law. The issue is complicated by the fact that there are both statutory minimums and common-law precedents to consider, in addition to written agreements between the employer and employee in many cases. These components are often at odds, which can lead to disputes.

Historically, courts across Canada have tended to side in favour of employees, even if there is a termination clause. In an effort to ensure fairness to an employee who has been terminated without cause, it is not uncommon for a termination clause to be found vague or ambiguous, enabling the court to invalidate the term and award a longer notice period. However, two recent decisions indicate a trend in the opposite direction among Alberta courts.

Statutory and Common-Law Termination Pay in Alberta

The minimums regarding termination notice and corresponding pay are set out in ss. 56 and 57 of Alberta’s Employment Standards Code. When an employer terminates the employment without cause, the minimum notice periods range from 1 week to 8 weeks, depending on the length of the employment. However, these are just the statutory minimums. There is also a history of jurisprudence that has set an expectation that employees terminated without cause are entitled to a more generous notice period under the common law.

When calculating an appropriate notice period, courts will take a number of factors into consideration, including:

  • The length of the employee’s service with the company;
  • The nature of the work;
  • The age of the employee;
  • The way in which the employee was dismissed;
  • The reason for the termination; and
  • The ability of the employee to find similar work following termination.

This is to ensure employees receive adequate pay to account for their specific circumstances. For example, a senior-level employee who has been with a company for 35 years and is approaching retirement age will likely have a more difficult time securing an equivalent role for similar pay with another company than a younger person terminated from an entry-level position after 1 year.

Common-law notice periods can be significantly more generous than those outlined in the legislation, and for this reason, courts are often reluctant to enforce restrictive termination clauses which may severely limit the notice to which an employee is entitled. Given the fact that most contracts are drafted by the employer, any ambiguity will be interpreted in favour of the employee.

Recent Alberta Decisions Favour Taking Termination Clauses at Their Word

Two recent employer-friendly decisions, one from the Alberta Provincial Court and the other from the Court of Queen’s Bench, indicate that courts in the province are perhaps more willing to give effect to termination clauses when the terms are well-defined.

Lawton v. Syndicated Services Inc.

In this decision, released just a few weeks ago, the employee in question had been with their employer for less than two years. At the time of his hire, in the role of Chief Operating Officer, he entered into an employment agreement after back-and-forth negotiations between himself and the employer. One of the items he had negotiated was extending the notice period for termination from two weeks to four weeks. After the project the employee had been hired to oversee became too costly to continue, the employer terminated his employment, providing four weeks’ notice per the termination clause in the employment contract. The employee brought a claim against the employer seeking nearly $65,000 in severance pay in addition to other damages.

The court reviewed the contract and found that the notice period which had been negotiated between the parties (four weeks) was considerably more generous than the employee would have been entitled to under the Employment Standards Code (1 week), given the length of employment. Further, the clause in the contract was clear and unambiguous in its language. The court held that “parties are entitled to negotiate terms of employment contacts and where the terms do not interfere with statutory requirements they ought to be enforced”. As a result, the claim for severance pay was dismissed.

Bryant v. Parkland School Division

This decision, released in May 2021, is similar to Lawton v. Syndicated Services Inc. in that the Court reviewed the employment contracts of the plaintiffs and found that the notice period set out in the termination clause was unambiguous. Each of the three plaintiffs had been employed by their employer for at least ten years. They had each signed an employment agreement that contained a termination clause which stated the employer was permitted to terminate employment with “60 days or more written notice”. Due to a restructuring program, the employees were terminated, and each was provided with termination pay in lieu of notice covering a period of 60 days. The employees brought a claim against their employer for common law termination pay, saying that the term was ambiguous due to the phrase “or more”. The plaintiffs claimed that this phrase set the floor of the notice period at 60 days, with no information given on what would warrant an increased notice period, and what the ceiling of the notice period would be.

In examining the clause, the court found that it should be interpreted using the plain and ordinary meaning of the words. The clause created a minimum notice period of 60 days, with an option for the employer to increase the notice period at its sole discretion. If the employees were not comfortable providing such discretion to their employer, they could have negotiated a different term before signing the agreement. Further, the notice period was in line with the statutory minimum for an employee of at least ten years, which was 8 weeks. Given this, the court dismissed the claim.

Clear, Unambiguous Termination Clauses are Critical

These decisions indicate that, so long as a termination clause is clear and unambiguous in its wording and aligns with the statutory minimums set out in the Employment Standards Code, employers will be able to rely on the term in the event of a dispute. For this reason, it is important to craft employment contracts with the help of a skilled employment lawyer who can help to ensure the terms of the agreement will stand up to judicial scrutiny.

Contact DBH Law for Review of Employment Agreements & Termination Packages

The lawyers and staff at DBH Law rely on our quarter-century of employment law experience to provide our clients with strategic and pragmatic legal guidance on termination packages and employment agreements. We believe in long-term relationship-building and work hard to provide clients with peace of mind throughout the duration of their employment relationship. We aim to be there for you not just at the outset of your employment, but also to be your trusted advisors at every other stage. Contact us online or by phone at 403-252-9937 to discover how we can help you today.