In Singh v Clark Builders, 2025 ABKB 3 (Brookes, J) the Alberta Court of King’s Bench found that a termination clause in an employment contract was clear and enforceable, relying heavily on the surrounding circumstances of the negotiations leading to the contract and the sophistication of the parties. The Court also rejected an argument of “changed substratum” and arguments that the employer repudiated the contract and should not be able to rely on it.
This case is important because it is a fairly major win for employers on the interpretation of termination clauses in employment contracts and other issues in employment law, where most of the caselaw in the last few years has not been very favorable to employers.
Facts
The following were some of the pertinent facts:
- The plaintiff Jamey Singh worked for the defendant employer, Clark Builders
- In 2012, Mr. Singh was working for Ledcor as VP of Operations when he met with the CEO of Clark Builders at an industry event, and started talking about Mr. Singh joining Clark Builders
- The parties negotiated back and forth over the terms of an employment contract
- The termination clause in the final draft provided to Mr. Singh indicated it could be terminated by Clark Builders without cause “by providing you with notice of termination, or pay in lieu of such notice, in accordance with the provisions of the provincial Employment Standards Code”. Mr. Singh made some changes in pen to the termination clauses, one of which indicated that Clark Builders could terminate employment “in accordance with the notice provisions” contained in an earlier draft from Clark Builders, which had indicated that Clark Builders could terminate his employment on “90 days” notice
- Ultimately Mr. Singh signed an employment contract with Clark Builders and started in the position of VP Corporate Operations. It was intended from the start that when the COO at the time retired, Mr. Singh would become the COO
- In 2015, the former COO retired and Mr. Singh became COO. The parties did not sign a new employment contract at that time
- In 2018, his role and title changed to COO Major Projects. There was no new employment contract at that time either
- Mr. Singh’s employment was terminated in 2019
- The parties attempted to negotiate a settlement but were unable to. Mr. Singh sued for wrongful dismissal.
Analysis / Conclusion
The main significant issue in this case was whether Mr. Singh was entitled to reasonable notice of dismissal at common law (severance pay).
Clark Builders argued that the termination clause contained in Mr. Singh’s employment contract prevented him from seeking common law severance.
Mr. Singh argued that the termination clause was unenforceable to prevent him from receiving severance on several bases:
- That the wording was not clear enough to limit reasonable notice
- That he had been promoted to a higher position by the time of termination, so there was a “changed substratum” and the contract should not apply to him in any event
- That Clark Builders’ could not rely on the employment contract in any event because it alleged just cause for termination in bad faith
- That Clark Builders’ could not rely on the employment contract in any event because it did not pay out the termination pay amount specified in the contract upon termination of employment
The Court first interpreted the employment contract. The Court found that the factual matrix and surrounding circumstances of the contract had to be considered. The Court noted that Mr. Singh was sophisticated and experienced in negotiating, and that he was thorough in reviewing and negotiating the offer.
The Court concluded that the termination clause could only reasonably bear one interpretation: Clark Builders could terminate Mr. Singh’s employment immediately for just cause or by providing him with 90 days’ notice or pay in lieu of notice.
The Plaintiff had argued that the 90 days should be interpreted as the minimum under the contract, but the Court disagreed:
[54] The notice provision described in the Offer of Employment applicable to employer notice is a “90-day notice period for the employer”. To interpret this phrase as meaning a minimum 90 days’ notice period would require adding words which were not included and is not supported by evidence of any mutual and objective intention of the parties.
The Court went on to find that the usual principle of contra preferendum – which in employment law usually means interpreting ambiguous terms against the interests of the employer – did not apply in this case because Mr. Singh was sophisticated and negotiated the terms with Clark Builders at length.
The Court rejected the “changed substratum” argument on the basis that “significant”, “radical” or “dramatic” changes to someone’s employment were required, where in this case he was close to c-suite from the start and his later position as COO was contemplated at the time of hiring.
Mr. Singh had argued that the employer alleged just cause for dismissal in bad faith, thereby repudiating the employment contract and losing the right to rely on the termination clause. The Court did not decide if there was just cause for dismissal, but found that Clark Builders had not alleged it in bad faith in the circumstances, and so was not prevented from relying on the termination clause due to its just cause allegation.
Mr. Singh had argued on the basis of several cases that Clark Builders repudiated the employment contract termination clause by not paying out the 90 days unconditionally. Mr. Singh argued this prevented them from relying on the clause. The Court rejected this argument in the circumstances on the following basis:
[161] I conclude Clark’s failure to pay Singh 90 days’ pay in lieu of notice under the Employment Contract was not a repudiation of the Employment Contract because Clark believed in good faith there was just cause for dismissal and the parties were in the process of attempting to negotiate a settlement.
Overall, the Court upheld the employment contact and termination clauses and found that Mr. Singh was not entitled to severance pay (reasonable notice).
My Take
This case is fairly unique in that the plaintiff was very sophisticated and there were extensive negotiations surrounding the employment contract (and termination clauses in particular). The Court placed a great deal of emphasis on these surrounding circumstances when interpreting the termination clause.
If it were not for these unique circumstances, the termination clauses may not have been interpreted in the manner they were.
To me the most interesting parts of this case were the consideration and reasoning around whether Clark Builders could rely on the termination clauses in light of making allegations of just cause and failing to pay out the contractual severance pay unconditionally. The case provides some guidance on these areas, and cites some of the relevant case law as well.
All told, this case was a fairly significant win for employers.
Bow River Law provides these regular legal blog articles for the purposes of legal news, 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 employment lawyers handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.
