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June 12, 2012
By Sheryl Smolkin
John Wright was employed by The Young and Rubicam Group of Companies for just over five years. He signed an employment contract at the time of hire which set out his compensation package including a base salary of $230,000, a stock option plan, group insurance benefit plan, matching Group Retirement Savings Plan contributions and an annual bonus plan.
The employment contract also included provisions regarding termination without cause. Based on the contractual terms when Wright was unjustly fired, the company offered him 13 weeks of base salary plus 13 weeks of RSP contributions, car allowance payments and group insurance benefits. Life insurance and disability insurance were discontinued after 10 weeks – based on the statutory minimum requirement of five weeks of termination pay plus five weeks of severance pay.
Counsel for Wright argued that the employment contract as a whole had two major deviations from the Employment Standards Act requirements:
- First, by stating “the payment will be inclusive of all notice statutory, contractual and other entitlements to compensation and statutory severance pay you have in respect of the termination of your employment” the contract specifically excluded employee benefits.Nevertheless, as noted above, the company offered Wright benefits coverage.
- Second, the aggregate number of weeks of termination pay and severance for longer service employees was not compliant. For example, if Wright had been terminated after 8.5 years of employment, the contractual entitlement of 16 months of base salary would not have met the statutory minimum of 16.5 weeks.
Madam Justice Wailan Low totally invalidated the employment contract even though the provisions thatapplied to Wright in these circumstances were legally compliant, noting that any ambiguity should be resolved in favour of the terminated employee.
Because Wright was out of work for 12 months in spite of his efforts to find a suitable job sooner, the judge awarded him 12 months pay in lieu of notice, as opposed to the 13 weeks initially offered to him by the company.
What does this case mean for you?
If you signed an employment contract and you are subsequently terminated, the contract may be invalid if the termination pay and severance pay offered in any way deviates from the minimum legal requirements. Get independent legal advice before you accept an offer from your former employer and make sure your lawyer carefully reviews the terms of the contract.
The Law Society Referral Service is a public service of the Ontario Law Society that helps people find a lawyer or paralegal. They will give you the name of a lawyer or paralegal who will provide a free consultation of up to 30 minutes. You can access the service by calling: 1-800-268-8326 or 416-947-3330 (within the GTA).
Related: How to find a lawyer