In Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222, the British Columbia Court of Appeal (the “Court of Appeal”) upheld the British Columbia Supreme Court’s (the “Supreme Court”) decision that the termination clause in the plaintiff’s employment contract was enforceable and sufficient to displace the common law presumption of reasonable notice. The common law presumption of reasonable notice (the “presumption of reasonable notice”) is a non-exhaustive multi-factor test which the courts use (when no statutory minimum is stated in an employment agreement’s termination clause) to determine how much notice an employer is obligated to give to an employee at the time of a without cause termination. The Court of Appeal adopted a common-sense approach and highlighted that reference to the Canada Labour Code (which sets out the federal minimum severance requirements) (the “Code”) was sufficient to displace a different notice period.
Background
In this case, the plaintiff was employed by the defendant, a federally-regulated employer, for approximately 3 years as the Vice President in Maintenance Operations. On March 30, 2020, the defendant terminated the plaintiff’s employment without cause because of a downturn in business caused by the COVID-19 pandemic. The plaintiff’s employment agreement with the defendant contained a termination clause which incorporated the notice period and severance clause found in the Code. Upon termination, the defendant paid the plaintiff two weeks of salary in lieu of notice and five days of severance pay in accordance with the Code.
The plaintiff disagreed with the defendant’s assessment of his entitlements. He brought a Supreme Court action for wrongful dismissal and sought entitlement to reasonable notice as his remedy. The plaintiff argued that the termination clause was ambiguous and unenforceable because it did not clearly define his termination entitlement amongst other arguments.
In response, the defendant filed an application to dismiss the plaintiff’s claim, arguing that the termination clause restricted the parties entitlements to the minimum notice period outlined in the employment agreement (i.e., the Code).
The Supreme Court found that the termination clause was not ambiguous and was sufficient to rebut the presumption of reasonable notice. The plaintiff claimed the Supreme Court erred in its finding and appealed the Supreme Court’s decision.
Issues
The Court of Appeal examined whether the termination clause in the plaintiff’s employment agreement was enforceable and whether the termination clause restricted the plaintiff’s termination entitlements to the minimum requirements because of its reference to statutory notice periods found in the Code.
Findings
The Court of Appeal dismissed the plaintiff’s appeal, upheld the Supreme Court’s conclusion but for different reasons, and found the termination clause was enforceable. It clearly stated a notice period other than reasonable notice. This meant that the plaintiff was only permitted the termination entitlements that flowed from the Code.
The Court of Appeal found that by using a “practical, common-sense approach to contractual interpretation” meant that the parties clearly intended and the plaintiff knew and accepted that his termination entitlements would be governed by the Code and not the presumption of reasonable notice. In its reasoning, the Court of Appeal noted proper contractual interpretation is “not accomplished by disaggregating the words in a termination clause” as a way to find the clause was unenforceable. Instead, the employment agreement should be read as whole in the surrounding context of when the parties signed it.
Key Takeaways
This case is an important reminder for employers and employees in B.C. that an employment agreement and any termination clauses it may contain should be interpreted in a holistic and purposive manner.
In response to this decision, employers should consistently review their employment agreements to ensure the termination clauses are not ambiguous because an employer may unintentionally trigger common law obligations. Similarly, employees should consider having their employment agreement or severance offer reviewed by an employment lawyer because they may be entitled to receive more than the statutory minimum even if their contract seems to suggest otherwise.
If you have any questions about termination clauses, employment agreements or other workplace issues, please reach out to Tiffany Lee at [email protected].