Employment Contract Termination Clause is “Long and Complicated” but not Ambiguous

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  • December 16, 2015

Employment Contract Termination Clause is “Long and Complicated” but not Ambiguous

A recent decision from the B.C. Supreme court is a good reminder to employers that a properly drafted employment agreement can save considerable severance costs in respect of dismissed employees.

In Damani v. Stuart Olson Construction Ltd., 2015 BCSC 2322 (CanLII) the court held that an employment agreement which purported to limit an employee’s severance on dismissal, though “long and complicated”, was nonetheless enforceable.

The plaintiff, Ms. Damani, was hired as a project assistant by Stuart Olson Construction Ltd., subject to her signing a written employment contract. She received the contract three days later and was given a week to sign it. The contract contained a lengthy clause permitting termination without cause on the provision of minimal notice or pay in lieu of working notice. She was requested to sign the contract acknowledging that she understood the terms of the contract and had an opportunity to seek independent legal advice.

After a new manager was appointed, Ms. Damani claimed that her workload increased significantly and she was required to work overtime without pay. She raised her concerns a number of times before scheduling a meeting with the employer’s human resources department. The day before her scheduled meeting and a little more than nine months after she commenced employment, she was terminated without cause. The employer paid her one week’s pay and benefits and offered an additional $1,000 in exchange for signing a release that included non-competition and non-solicitation clauses. Although she refused to sign the release, the employer paid her another week’s pay, in accordance with the terms of her employment contract.

Ms. Damani filed a complaint with the Employment Standards Branch alleging unpaid overtime wages amounting to more than $5,000. She also commenced a wrongful dismissal action claiming the termination clause was unclear, convoluted and confusing, and that she was entitled to reasonable notice of termination instead. She sought additional damages for the Employer’s alleged bad faith because she alleged the underlying reason for her termination was her repeated complaints about the employer’s failure to pay her for her overtime work.

The employer applied to dismiss the wrongful dismissal claim without a trial on the basis that there was no genuine issue for trial. The Judge granted the application. She found there was no dispute that, absent unconscionability, an employer may limit notice or severance in an employment contract, provided it is clear. Although the termination clause in this case was “long and complicated, it was not ambiguous”.