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Employment Agreement and The Minimum Standards

Employment Agreement and The Minimum StandardsThe Employment Standards Code provides the minimum standards that must be followed by employers and employees. It is designed to promote, at the very least, fair treatment of employers and employees by prescribing basic rules for terms and conditions of employment. However, it is important to remember that the Code is only the “minimum” required by law.

The Code does not prevent employers from providing their employees with greater benefits than those prescribed under the Code.  Section 3(1) of the Code states as follows:

3(1) Nothing in this Act affects

(a) any civil remedy of an employee or an employer;

(b) an agreement, a right at common law or a custom that

(i) provides to an employee earnings, leaves of the types described in Divisions 7 to 7.6 or other benefits that are at least equal to those under this Act, or

(ii) imposes on an employer an obligation or duty greater than that under this Act.

As such, an employee can seek greater benefits than the minimum standards if his or her employment agreement does not limit his or her entitlement to the minimum.

This is especially important when it comes to termination of employment. For example, under the Code, an employee who has been employed for 10 years is entitled to receive a minimum termination notice of 8 weeks, or payment in lieu of that 8 weeks. However, if there is no agreement that limits the employee’s entitlement to the minimum under the Code, the employee can seek more generous notice period, or payment in lieu of such notice period,  under common law, which could be far greater than the minimum 8 weeks.

In addition, an employer and an employee cannot contract out of the Code and violate the minimum standards. Section 4 of the Code states as follows:

4 An agreement that this Act or a provision of it does not apply, or that the remedies provided by it are not to be available for an employee, is against public policy and void.

Going back to the previous example, if there is an agreement between the employer and the employee that provides a termination notice of 6 weeks to the employee who worked for 10 years, the agreement is void (as it provides less than the minimum under the Code). In the result, the employee can seek more generous notice under common law.

Earlier this year, in Waksdale v Swegon North America Inc., 2020 ONCA 391 [Waksdale], the Ontario Court of Appeal analyzed an employment agreement in light of Ontario Employment Standards Act, particularly those sections similar to sections 3 and 4 of the Alberta Employment Standards Code.

In Waksdale, the court considered enforceability of a “Termination of Employment with Notice” clause which attempted to eliminate an employee’s entitlement to common law notice period. In this case, the employee argued that the employment agreement itself was not enforceable as one of the clauses in the employment agreement, namely, “Termination for Cause” clause did not comply with the minimum standards. In response, the employer argued that, although the “Termination for Cause” was void by the legislature, the employee was not terminated for cause, and the “Termination of Employment with Notice” clause was still valid and enforceable. Alternatively, the employer relied on a severability clause in the employment agreement.

In the analysis, the court summarized some of the fundamental rules about employment agreement and the minimum standards as follows:

[8] … The enforceability of a termination provision in an employment contract must be determined as at the time agreement was executed … Even if an employer’s action comply with its [minimum] obligations on termination, that compliance does not have the effect of saving a termination provision that violates the [minimum standards].

[10] … An employment agreement must be interpreted as a whole and not on a piecemeal basis … Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the [minimum standards], courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s [minimum] rights.

[11] … The court is obliged to determine the enforceability of the termination provisions as at the time the agreement was executed; non-reliance on the illegal provision is irrelevant.

[14] … A severability clause cannot have any effect on clauses of a contract that have been made void by statute… Having concluded that the Termination for Cause provision and the Termination of Employment with Notice provisions are to be understood together, the severability clause cannot apply to sever the offending portion of the termination provisions.

Although Waksdale has not been considered by Alberta Courts yet, it gives a sufficient reason for both employers and employees to review their employment agreement once again. A severability clause in an employment agreement may not save the employer from potential liabilities arising from the termination.

Please contact the award-winning Calgary Employment lawyers at Osuji & Smith for your employment law needs and inquiries.

By: Justin (Hyuk Ju) Kwon

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