Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 (CanLII)
The Canadian distributor for Harley-Davidson was sold and its employees, including the Plaintiff, dismissed. The Plaintiff, who had worked for the Defendant for 8 years, was employed under an employment agreement that read:
[The Company] is entitled to terminate your employment at any time without cause by providing you with 2 weeks’ notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph…. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000.
The Defendant provided the Plaintiff with working notice and pay as per the agreement. Nevertheless, the Plaintiff took action for wrongful dismissal. The trial judge held that the agreement was enforceable.
The Plaintiff appealed to the Ontario Court of Appeal. The Court found that the Plaintiff had, in fact, received more than her statutory entitlement on account of notice of termination and severance, and that the Employer had continued contributions to the employee benefits plan. Payment of other amounts were contingent upon the signing of a release. The Court of Appeal concluded that the termination provision was unenforceable: “On its plain wording, the clause excludes Deeley’s obligation to contribute to Wood’s benefit plans during the notice period.” (Para. 38.)
The Employer’s argument that the word “pay” was broad enough to include both base salary and benefits was rejected. At best the language was ambiguous. The Court noted: “where the language of a termination clause is unclear or can be interpreted in more than one way, the court should adopt the interpretation most favourable to the employee.” The fact that the Employer had, in fact, made payment to the benefit plan, were material to the interpretation of the termination clause: “Its enforceability or unenforceability depends on whether the termination clause itself included or excluded Deeley’s obligation to make those contributions.” (Para. 51.)
With respect to severance pay, the Court concluded:
[62] The termination clause required Deeley to give Wood “two weeks’ notice of termination or pay in lieu thereof for each year or partial year of employment”. These payments and notice were “inclusive of [Wood’s] entitlements to notice, pay in lieu of notice and severance pay”. In my view, drafted in this way, the clause does not satisfy Deeley’s statutory obligation to pay severance pay. Deeley could fulfil its obligations under the clause in ways that would deprive Wood of her statutory severance pay. The termination clause is thus unenforceable, and Wood is entitled to common law reasonable notice.