Many employment contracts contain language that specifies what the employer must pay an employee when they end the employee’s employment. In most cases, the amount that must be paid is lower - far lower - than the amount the employer would have had to pay had the contract contained no such clause. Employers tend to slip these clauses into contracts and few employees are even aware that their rights have been severely compromised.
Naturally, courts look for ways to prevent the unfairness that results and tend to interpret the clause in favour of the employee, find that the clause is too ambiguous to lead to the result the employer desires, or decide that the clause is illegal altogether.
A new Court of Appeal decision that takes path #3 will have a profound impact because the clause involved in that case is one we are used to seeing over and over again. In Waksdale the Court of Appeal decided that, because an illegal ‘if we have just cause you get no compensation’ clause was found in the contract, the perfectly legal no cause clause (the one that says “we will pay you very little if we end your employment”) could itself not be enforced. Since the for cause clause could not be enforced, the whole termination clause could not be enforced.
The impact of this decision cannot be understated. Many employees have the same illegal just cause clause in their contracts. Those clauses are illegal because you cannot terminate an employee with absolute zero compensation even if there is just cause to terminate. The only time an employer can give nothing is if the employee engages in very, very serious forms of wilful misconduct.
Since many employment contracts have the illegal no compensation for just cause clause, the Waksdale reasoning means that those employees will be able to ignore the no cause language that would normally cause problems in a termination.
For Mr. Waksdale, he stands to receive about six months of pay instead of the one week of pay his termination clause provides for.
If your employment has been terminated, this new decision could certainly help you secure fuller compensation.