The Rule of Waksdale: Are Your Employment Agreements Up to Date?

Employment Standards Act, 2000 (ESA) notice and termination must be given for all terminations, even those for just cause, except for “prescribed employees” (see section 55 of the ESA). The disentitlement provision is in the Termination and Severance of Employment regulation under the ESA, which provides that employees are prescribed for the purposes of section 55 of the ESA if they are guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and had not been condoned by the employer.

In Waksdale v. Swegon North America Inc., 2020 ONCA 391, leave to appeal to the Supreme Court of Canada denied, the Court of Appeal for Ontario ruled that an otherwise enforceable “without cause” termination provision in an employment agreement is rendered unenforceable where the employment agreement also contains a “just cause” provision that contracts out of minimum standards legislation. The “rule of Waksdale” holds that if a termination provision in an employment contract violates the ESA, all the termination provisions in the contract are invalid.

More recently, in Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 the Court of Appeal found the motion judge erred in law when they allowed consideration of the Plaintiff ‘s sophistication and access to independent legal advice, coupled with the parties’ subjective intention to not contravene the ESA, to override the plain language of the termination provisions of employment contract which otherwise violated the ESA. As a result, the termination provision was set aside, and the Plaintiff was entitled to reasonable notice.

Employers should have their employment agreements reviewed by legal counsel to ensure the termination provisions comply with the rule of Waksdale. An unenforceable employment agreement could be a significant liability for an employer, particularly with respect to longer service employees.