By Barry W. Kwasniewski and Martin U. Wissmath

Court Upholds Employer’s Termination Provisions Excluding Common Law Notice

If there is no reasonable interpretation of an employment contract that could lead to an illegal outcome, then it would not violate employment laws, even if it does not exactly copy statutory language. That was the rationale in Bertsch v. Datastealth Inc., as the Ontario Superior Court of Justice upheld an employer’s termination provisions, finding them compliant with the Employment Standards Act, 2000 (“ESA”) and dismissing an employee’s claim for wrongful dismissal. The case was heard by motion under rule 21.01(1) of the Rules of Civil Procedure, brought by Datastealth Inc. to strike out the claim as disclosing no tenable cause of action. This decision, published October 8, 2024, is significant for charities and not-for-profits in Ontario, as it emphasizes the need for clear, legally compliant employment agreements that meet ESA standards. This case is also notable in comparison with recent jurisprudence as the court sided with the employer’s arguments on the interpretation of the termination clauses.

Gavin Bertsch (the “Employee”) was terminated from Datastealth Inc. (the “Employer”) on July 7, 2024, after roughly eight and a half months of employment. The Employee received four weeks’ pay in lieu of notice, which was higher than the one-week minimum required under the ESA. The written employment agreement dated July 14, 2023 limited the Employee’s rights on termination to the minimum entitlements under the ESA, and also provided that “the plaintiff contracts out of common law notice requirements,” according to the court.

Bertsch sued for wrongful dismissal, arguing the employment agreement’s termination provisions were unenforceable because they were ambiguous and failed to properly reference the statutory prescription for termination without notice under the ESA in Ontario Regulation 288/01: Termination and Severance of Employment (the “Regulation”). The Employee argued that the termination provisions violated the ESA because, according to the court, they purported to allow “termination for cause, without notice, whether or not there was ‘wilful misconduct, disobedience, or wilful neglect’.” Seeking to enforce alleged common law rights, which are significantly higher than the ESA minimum standards, the Employee claimed twelve months’ payment in lieu of reasonable notice, approximately $300,000.

The court found that termination provisions in employment agreements must “clearly comply with the ESA”, and failure to do so would render them void. However, the court concluded that the provisions in this employment agreement were clear and unambiguous, and did not violate the ESA or the Regulation. Specifically, the court noted that the agreement did not unlawfully exclude the Employee from receiving his ESA entitlements and that the language regarding the exclusion of common law notice was enforceable.

The court cited several cases, including Amberger v IBM Canada Ltd., Nemeth v Hatch Ltd., and Roden v Toronto Humane Society, to support the finding that the contract did not breach the ESA. The court rejected the Employee’s argument that the termination provisions were ambiguous, holding that there was no reasonable interpretation of the relevant clauses that would result in an illegal outcome.

The court concluded that no trial was necessary, as there were no facts in dispute that would require further examination. The Employee’s claim was struck out without leave to amend, and the court ordered him to pay $6,000 in costs to the Employer within 30 days.

​Read the October 2024 Charity & NFP Law Update