"At any time": The Merits, and the Limits, of the Dufault/Baker Approach
A little over a year ago, in Dufault v. Ignace, Justice Pierce of the Ontario Superior Court of Justice accepted an argument that a termination clause entitling the employer to dismiss on a not-for-cause basis "at any time" was in conflict with employment standards legislation, thus voiding the entire termination clause.
The Court of Appeal dismissed the employer's appeal, finding that the Waksdale problem in the contract was fatal, and declined to address the merits of the "at any time" issue.
Subsequently, in Baker v. Van Dolder's, Justice Sproat - found that he was bound to follow Justice Pierce's decision (as well as the Perretta approach I recently commented on). It's an interesting case because, while Justice Sproat is himself a well-regarded employment law jurist, he didn't engage much with the underlying principles, instead looking to the doctrine of stare decisis ("it stands decided") as recently expanded upon by the SCC in Sullivan.
I might almost think that, by declining to comment on the merits, it's a passive-aggressive criticism of the approaches. But it would not be particularly extraordinary for a judge to apply stare decisis while expressly criticizing it in obiter, and if Sproat really disagreed with these approaches, I tend to think he would have expressed those concerns, in an invitation for appellate intervention. (I'm more likely to take it as a silent critique of the propensity by appellate courts to dodge controversial issues: By dismissing the appeal from Dufault without commenting on this issue, they effectively left that proposition as the law in Ontario.)
So, since the Dufault is now the law in Ontario, and could (possibly) expand to other Provinces, let's talk about it.
Employment Standards and Void Contract Clauses
Every employment standards statute across the country has a provision in it that voids any attempt to contract out of it. This applies to minimum wages, overtime, everything.
Much of the case law on this 'voiding' arises in contexts where employers are trying to contract out of the obligation to give 'reasonable notice' of dismissal - substituting it with some lesser amount. The seminal case on this is Machtinger, a Supreme Court decision from the early 90's where employees were entitled, under the statute, to more notice than their contracts provided. The employers complied with the statutory obligations, and argued that this was enough - effectively, that the contract and statute should be read together as creating a 'greater of' analysis.
The Supreme Court didn't buy it: The non-compliant termination clause was void, leaving intact the implied contractual obligation to give reasonable notice, meaning that the plaintiffs in Machtinger got several months of notice, instead of the handful of weeks the statute guaranteed them.
Since then, BC and Ontario have developed clear lines of case law holding that the voiding mechanism under employment standards legislation is interpreted at the point the contract is entered into, based on whether the the contract complies fully with the statute in all circumstances: Even if, at the point of dismissal, the contract gives me more than my statutory minimums, the clause is void if it would give me inferior benefits at some other point in time in the actual or contemplated employment relationship.
That line of case law isn't all that well-developed in Alberta or other Provinces, but the statutes are similar. With BC and Ontario on the same page, it would be a poor bet to assume that other Provinces won't eventually follow suit. My commentary on it is here.
The Underlying Logic of "At Any Time"
It's fairly common for employers to frame their not-for-cause termination provisions as a right to dismiss "at any time, on provision of [x notice or compensation]".
The problem with this, according to the Dufault logic, is that legislation does limit when employment can be terminated: When an employee takes a protected leave, s.53 of Ontario's Employment Standards Act, 2000 creates a right of reinstatement at the end of the leave.
However, there is an exception: The right of reinstatement "does not apply if the employment of the employee is ended solely for reasons unrelated to the leave."
The Dufault approach holds that the contract reserves a broader right of dismissal to the employer than that permitted by the statute, allowing a without cause dismissal even when the employee has a presumptive right to reinstatement.
Other Provinces have similar language. Alberta's Employment Standards Code has a provision for each protected leave that "No employer may terminate the employment of, or lay off, an employee who has started [x] leave", and an exception that it doesn't apply if an employer "suspends or discontinues in whole or in part the business, undertaking or other activity in which the employee is employed", subject to an enduring duty to reinstate (e.g. if operations resume) or provide alternative work.
Under BC's Employment Standards Act, s.54 prohibits an employer from terminating employment "because of an employee's pregnancy or a [protected] leave", and requires the employer to place the employee back in their position or a comparable position at the end of a leave - subject to an exception that's operatively similar to Alberta's.
So these statutes do constrain the timing and circumstances under which dismissal is authorized, and there's a certain plausibility to the notion that a contractual term extending across those constraints, in light of the Shore/Wunderman/Covenoho approach, should be voided.
But I think there's another facet to this debate that hasn't been appropriately explored.
What About The Exception?
In Ontario in particular, there's a clear exception to the right to reinstatement that limits its application: In effect, a dismissal for reasons unrelated to the leave overrides any right of reinstatement.
It's fairer, from an interpretive standpoint, to conclude that Ontario's ESA prohibits termination due to the leave and that the right of reinstatement is subject to the employment relationship not having been lawfully terminated: An employer is limited in why they can terminate employment, but they're not actually limited in when they can terminate employment.
So we run up against an interpretive tension when asking if "at any time" language contravenes the ESA, because on the one hand it does appear to confer broad discretion to terminate, even under circumstances where there's a presumptive right to reinstatement; but on the other hand, when you can read language as complying, or not, with applicable legislation, we prefer to assume that its meaning is compliant. It seems fairly coherent to say, "Sure, there are times when the law restricts us from dismissing for specified reasons, but we're not saying in the contract that we can dismiss for those reasons. We're just saying that we can dismiss - which is not prohibited outright - for circumstances where it's not otherwise illegal."
I mean, the contract also doesn't completely rule out ejecting a dismissed employee from the property by firing them from a cannon, but there's no reason to interpret the contractual language as authorizing that.
This is a close case, but while Dufault finds that the broad discretion is in conflict with the non-absolute right to terminate, I'd tend to come down on the side of saying that Dufault gets it wrong, in the Ontario context. That said, I also think that the statutory differences in Alberta and BC are significant to this question: While an employer can lay off an employer on leave if (and only if) it's part of a discontinuance of the business in which the employee worked, that layoff comes together with enduring rights of recall that are inconsistent with having permanently terminated the contract of employment.
Human Rights and Anti-Reprisal Clauses: A Different Analysis
There are a whole stack of reasons why it can be illegal to dismiss employees. Various legislative regimes have provisions that prohibit termination of employment for specified reasons:
- You can't dismiss an employee for standing on their rights under employment standards legislation (e.g. demanding overtime pay they're owed);
- You can't dismiss an employee for standing on their rights under occupational health and safety legislation;
- You can't dismiss an employee for exercising rights under labour relations legislation (e.g. joining a union);
- You can't dismiss an employee based on prohibited grounds of discrimination under human rights legislation (e.g. because of their race or religion), or because they stood on their rights under such legislation (e.g. complained about being sexually harassed).
It's easy to conflate "Don't terminate people on protected leaves" with "Don't terminate people for standing on their statutory rights."
But the right of reinstatement upon return from a protected leave is analytically slightly different from a prohibition on terminating for specified illegal reasons.
I would argue that language saying that employees can be dismissed "for any reason" would be clearly problematic in the employment standards context - and this isn't particularly technical; I've always been careful in my own writing not to say "for any reason", because I'm very cognizant of those exceptions.
Importantly, however, the other statutes in question don't have comparable voiding mechanisms.
As an articling student, a long time ago when the earth was young (and, notably, before Wunderman or Covenoho), I took the position in an Ontario Small Claims matter that a clause should be voided because it conferred too broad a discretion on the employer to dismiss, even if the reasons for dismissal infringed, say, human rights legislation. (The matter eventually settled.) So the idea isn't crazy. But it's probably wrong.
It's true that you can't contract out of the various obligations in human rights legislation, etc., but the operation of that principle is different. Unlike employment standards, which explicitly says attempts to contract out are void, human rights legislation simply applies notwithstanding anything in a contract.
Employment standards legislation changes the terms of a contract. Human rights legislation ignores the terms of a contract. That's a big difference, for present purposes: In particular, you don't need to craft contractual terms around human rights concerns, because those contractual terms will always be subject to human rights concerns. An employment contract can require an employee to work 40 hours per week, and there's nothing wrong with that, but a disability might nonetheless require the employer to assess whether reasonable accommodation might extend to allowing a modified schedule. The human rights tribunal won't void the contractual provision, nor will they be bound by it; they'll just say that if the employer doesn't properly consider and follow its accommodation duties, it's breached its statutory obligations.
Takeaways
Here's my thinking:
- Dufault is probably wrong in Ontario, but it's the law at present;
- Dufault would probably be right in Alberta or BC, in theory, but there's certainly no guarantee they'll follow it;
- The Dufault logic almost certainly shouldn't extend to other statutory prohibited reasons for dismissal, but this is an evolving and uncertain area of law.
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The author is an in-house lawyer in Alberta. Views are the author's alone. This article does not contain legal advice, but general legal information. If you have a legal issue, consult a lawyer.
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