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Alberta Employment Contract Failed to Limit Reasonable Notice
This case is important because it has an impact on how much reasonable notice (severance) employees under contracts are potentially entitled to.
The following were the relevant facts summarized by the Alberta Court of Appeal:
- Three long term employees were employed with Parkland School Division (the “employer”).
- All three signed a standard form employment contract, the terms of which had been drafted by the employer and which contained the following termination provision:
This contract may be terminated by the Employee by giving to the Board thirty (30) days or more prior written notice, and by the Board upon giving the Employee sixty (60) days or more written notice. [emphasis added].
- The employees brought an action claiming notice above and beyond the 60 day period in accordance with the common law requirement of reasonable notice.
- An application for summary judgment by the employees and a cross-application by the employer for summary dismissal was heard by the chambers judge, who found that the employment contracts were neither silent nor ambiguous as to termination notice and as such there was no basis upon which the common law requirement of reasonable notice could be implied.
Analysis / Conclusion
The majority for the Alberta Court of Appeal held that the clause was not sufficiently clear, unequivocal and unambiguous to remove or limit the presumed common law right of the employees to reasonable notice and that the reading more favourable to the employee had to prevail.
In their reasoning, the Alberta Court of Appeal confirmed the following principles to be applied to the interpretation of the termination provisions in employment agreements:
- Courts recognize the power imbalance and inequality of bargaining power inherent in the employment relationship, and the limited opportunity of employees to negotiate contractual terms.
- Courts have repeatedly recognized the significance of work (and the manner in which employment can be terminated) to an individual’s life and well-being.
- Interpretive principles have therefore evolved to protect employees. One such principle is that, “in employment law, uncertainty ought to be resolved in favour of the employee.” Holm v AGAT Laboratories Ltd, 2018 ABCA 23 at para 34.
- While it is open to an employer to include language in the contract rebutting that presumption, the language must be “clear and unambiguous” to be effective.
- Courts have also said the contract must contain language that is “clear and unequivocal”, or that meets a requirement for a “high level of clarity”, to extinguish the common law right to reasonable notice.
Therefore, the Alberta Court of Appeal stated that the starting point, is that there is a presumption of an implied term requiring the employer to provide reasonable common law notice on dismissal. Only where the employment contract unambiguously limits or removes that right will the presumption be rebutted, and the implied term ousted.
In their view, the chamber’s judge did not begin his analysis of the above principles at the forefront.
In conclusion, the Majority held that the clause did not clearly fix the employees’ notice entitlement. It did not impose an upper limit on the amount of notice an employee was entitled to receive. It did not suggest that 60 days was the maximum notice to which an employee was entitled. To the contrary, it explicitly provided that an employee can be entitled to more notice.
This is a good case that succinctly summarizes the current legal principles governing the interpretation of termination provisions in employment agreements. It is also an excellent reminder that the analysis of such terms begins with the concept that there is an implied term that an employer is required to provide reasonable common law notice on termination and thereafter, whether there is a provision in the employment agreement that unambiguously limits or removes that right.
Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
Bow River Law is a team of knowledgeable, skilled and experienced lawyers handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we serve Alberta. Let us help you.