Are Contractual Termination Provisions Reliable? 


February 2014

Employment and Labour Bulletin
A recent decision by the Ontario Court of Appeal is generating interest as a welcome victory for employers. In Musoni v. Logitek Technology Ltd.,1 the Court upheld a termination provision in an employment agreement without scrutinizing the validity of the provision.


Musoni commenced employment with QLogitek in October 2005 as a bilingual customer support agent. His written employment agreement provided that either party was entitled to terminate Musoni's employment on 15 days' notice. Although this termination provision complied with the notice requirements in the Employment Standards Act, 2000 ("ESA") at the time of termination, with additional service, his statutory notice entitlement would have eventually exceeded 15 days. Furthermore, the termination provision did not provide for severance pay or continuation of benefits during the statutory notice period pursuant to the ESA.

In March 2008, QLogitek terminated Musoni's employment on a without cause basis. Relying on the termination provision, QLogitek provided Musoni with an amount equal to 15 days' pay in lieu of notice. Musoni subsequently brought an action for wrongful dismissal.

At trial, the Superior Court dismissed Musoni's action on the grounds that he had received his full notice entitlement under both the employment agreement and the ESA. In coming to this conclusion, the Court noted that:

Although the Plaintiff did not have legal advice when he signed the Employment Agreement, there is no suggestion that he did not read it and understand it. Indeed, he had several weeks to do so prior to signing it. The Plaintiff is a sophisticated person who is articulate in both English and French.  

In a brief endorsement, the Court of Appeal upheld the decision of the Superior Court, stating that: "The employment contract between the appellant and the respondent was clear in providing for 15 days' notice in order to terminate. The appellant was given pay in lieu of notice with (sic) accordance with the agreement…".

Lessons for Employers

Although the reasoning in this case is helpful to employers, as it suggests that employees should be held to the contracts that they sign, we would advise caution before relying too heavily on this case.

In particular, this decision appears to be inconsistent with some earlier case law that indicates contractual termination provisions may be void and unenforceable if they: (a) do not expressly state that benefits continue during the statutory notice period, and/or (b) could conceivably provide for less notice and severance pay than the minimums under the ESA, even if the formula for a particular employee at the time of dismissal results in a greater benefit2.

Neither the Superior Court nor the Court of Appeal considered the findings of earlier courts, because Musoni (who was self-represented) conceded that his contract was valid and in force, and he did not appear to rely upon any case law to challenge the validity of the termination provisions. Instead, Musoini's action was premised on other alleged wrongdoings (e.g., that QLogitek had terminated his employment on a mistaken belief that he had been convicted of a criminal offence), which the court determined to be irrelevant.

It is also unclear whether QLogitek provided benefits to employees, or met the threshold for statutory severance pay, which could distinguish this case (in some respects) from earlier case law.

At the end of the day, this case will be helpful to employers who seek to rely upon valid and enforceable employment contracts. However, given the minimal analysis of the termination provisions, employers should not rely upon this case to save contracts that fail to meet minimum statutory standards. There is no substitute for properly drafted termination provisions, and it remains crucial for employers to ensure that such provisions provide for (at least) the minimum amount of notice, severance pay (if applicable) and benefits continuation required under the ESA. 

By Paul Boshyk and Lyndsay Wasser

2013 ONCA 622.
2For example, see Wright v. The Young and Rubicam Group of Companies wherein the Court stated that "it is neither reasonable nor practical to leave the individual employee in the position of having to keep an eye on the relationship between the statutory minimum and the contractual term."

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014