In the recent decision Forbes v Glenmore Printing Ltd, 2023 BCSC 25 (“Forbes”), the BC Supreme Court established that a termination clause in an employment contract does not have to mention “group termination” entitlement in order to be enforceable. In this case, a former employee sought to have the termination clause of his employment contract deemed unenforceable. KSW Lawyers’ employment law practice leader, Chris Drinovz, successfully represented the Employer in opposing this argument at trial.

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Background

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The defendant in the case, Glenmore Printing Ltd. (“Glenmore”), a local custom print and packaging business, employed Mr. Forbes as a senior pressman for 6 years and 4 months until he was laid off as a result of the COVID-19 pandemic and economic downturn.

The parties agreed prior to trial that the layoff was a constructive dismissal, and the only remaining issue at trial was the value of the severance, which would represent payment in lieu of notice.
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Glenmore argued that it had satisfied all its legal obligations as it paid Mr. Forbes 6 weeks’ severance in accordance with both the Employment Standards Act, RSBC 1996, c 113 (the “ESA”) and the termination clause in the signed employment contract.
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Mr. Forbes argued that the employment contract was unenforceable on the basis that it provided less entitlement than contemplated by the minimum requirements of the group termination provisions set out under section 64 of the ESA, therefore entitling him to a higher common law reasonable notice instead.

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Analysis

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It is well-established in BC law that if a termination clause potentially violates the ESA it will not be enforceable: Shore v Ladner Downs, 1998 CanLII 5755 (BC CA). Traditionally, this has applied primarily to termination clauses that provided for a lesser notice period than those set out in section 63 of the ESA.
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In this case, Mr. Forbes brought a novel argument attempting to extend this principle to include termination clauses that limit the employee’s entitlement to the formula set out in section 64 of the ESA which deals with “group terminations” (of 50 or more employees). Although Mr. Forbes was not part of a group termination in this case, if he had been he would have been entitled to more notice under section 64 than provided for by his employment agreement.
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Mr. Forbes’ employment contract set out the following termination clause (the “Clause”) which essentially mirrored the language contained in section 63 of the ESA:

        “Glenmore Printing may terminate this Agreement by giving the Employee

       (a) After the first three months of continuous employment, one week’s notice or wages,

        (b) After the first year of continuous employment, two weeks’ notice or wages, and

        (c) After three consecutive years of employment, three weeks’ notice or wages, plus one additional week’s notice or wages for each additional year of employment to a maximum of eight weeks’ notice or wages.”

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At trial, Mr. Forbes argued that by imposing an 8 week maximum for notice in the Clause, Glenmore was attempting to circumvent the minimum notice requirements for group terminations under section 64.
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The Court rejected Mr. Forbes’ argument.
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Instead, the Court concluded that the Clause was enforceable because section 63 of the ESA (which provides for a maximum of 8 weeks notice), establishes the minimum statutory requirements that are needed to oust the common law entitlement to reasonable notice, and not section 64.
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Further, the Court found that the Clause was enforceable because it was merely silent on the issue of Mr. Forbes’ entitlements in the event of a group termination, rather than expressly attempting to limit his entitlements in the event of a group termination (which would likely be unenforceable). This is because, where an employment agreement is silent on an issue, the employer will still be bound by the provincial employment standards legislation.
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In this case, the Clause did not place any limitations on Mr. Forbes’ potential entitlement in the event of a mass termination under section 64.
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In making these findings, the Court relied on Ly v British Columbia (Interior Health Authority), 2017 BCSC 42 (“Ly”), where it was determined that an extended probationary period did not expressly circumvent s 63 of the ESA, and that employees subject to an extended probationary period would still be entitled to benefits in accordance with section 63.
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A similar conclusion was also reached by the Ontario Court of Appeal once more in Nemeth v Hatch Ltd, 2018 ONCA 7 (“Nemeth”), the court decided that silence on severance pay did not denote an intention to contract out of Ontario’s employment standards regarding additional severance pay, and thus the termination clause was not void.

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Takeaways

1. In British Columbia, section 63 of the ESA (which provides or a maximum of 8 weeks’ notice for individual terminations) rather than section 64 (which provides a maximum of 24 weeks for group terminations) sets the minimum amount of notice required to limit an employee’s entitlement to common law reasonable notice.
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2. In order to be unenforceable, a termination clause needs to contain express language that points to an intention to contract out of the ESA. For example, a termination clause stating that an employee is only entitled to 6 weeks’ notice or pay in lieu of notice would likely be unenforceable.
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3. Employers should review and have their employment agreements updated periodically in order to limit their exposure to common law reasonable notice.  An enforceable contract can help avoid litigation costs down the road, and helps create certainty for both the employer and the employee.
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4. Employees should review their employment agreements carefully (ideally with an employment lawyer), especially when the contract contains a termination clause. An enforceable termination clause could potentially limit an employee to significantly less notice than they would be entitled to under the common law.
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Note to Readers: The information in this article is not legal advice. If you are looking for legal advice in relation to a particular matter please contact Chris Drinovz. Our experienced Employment & Disability Group is ready to assist you. Get in touch today.