Alberta Court of Appeal: Revisiting presumptions regarding termination provisions

The Court of Appeal of Alberta has recently overturned a Superior Trial Court decision which held that a contractual provision allowing an employee to be terminated on “60 days or more written notice” was sufficiently unambiguous to oust the employee’s presumed right to reasonable notice of termination of employment under the common law.

Background

Employees generally have an implied right to reasonable notice of termination of employment under the common law when terminated without cause. Reasonable notice, which can be as much as 24 months (or even more in exceptional circumstances), can be a significant source of employer liability. However, an employee’s entitlement to reasonable notice may be ousted by an enforceable termination provision. As such, many employers seek to include such provisions in their employment agreements. Nevertheless, such provisions are at risk of not being enforced if (among other things) they are ambiguous.

In his May 18, 2021 decision in Bryant v Parkland School Division, Rothwell J. of the Court of King’s Bench summarily dismissed the plaintiff employee’s wrongful dismissal claim on the basis that the termination provision in question was not ambiguous and therefore enforceable. Holding that there was no basis upon which the employee’s right to reasonable notice could be implied in the face of the language of the termination provision contained in their employment agreement, in interpreting the words “60 days or more”, the Court found that the words “or more” was not ambiguous (i.e. not reasonably capable of carrying two or more meanings) and therefore enforceable.

Court of Appeal decision

The employee appealed the Superior Trial Court’s decision. In its majority decision, Bryant v Parkland School Division, 2022 ABCA 220, the Appeal Court of Alberta held that Rothwell J.’s interpretation was not sustainable. Paperny J.A. and Feehan J.A. reasoned as follows:

In Canada, different principles apply to the interpretation of employment contracts as opposed to other commercial contracts. […] 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. Moreover, 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.

The starting point, then, 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.

After holding that the Court of King’s Bench “did not begin [its] analysis with these interpretive principles at the forefront”, the Court of Appeal reasoned that the termination provision, instead of being reasonably capable of only one meaning, in fact, “explicitly provid[ed] that an employee can be entitled to more notice. The inclusion of the words ‘or more’ recogniz[ed] a longer notice period as a realistic possibility.” 

Accordingly, the provision was ambiguous and the employee’s appeal was upheld; as a result, the case was referred back to the Court of King’s Bench for determination of the extent of the employee’s right to reasonable notice of termination of employment under the common law.

Takeaway for employers

Recent precedents from the Supreme Court of Canada, as well as provincial Appeal and Superior Trial Courts, have changed the way in which employment agreements are interpreted by the Judiciary in recent years. We encourage general counsel and in-house legal departments to ensure employment agreements currently in place (or those agreements that are in the process of being negotiated with employees) are vetted to ensure that appropriate measures can be taken to ensure that risk can be mitigated in the event of unforeseen future events or business decisions, which may, in turn, have an impact on an employer’s ability to retain (or even to continue growing) its workforce. In other words, what may appear upon first glance to be an enforceable termination provision in an ongoing negotiation (or even in a current employment agreement, which was negotiated and executed years prior), could in fact be legally unenforceable.

For further information please, contact any of the members of the DLA Piper Canadian Employment and Labour Law Service Group listed here. We would be pleased to provide any assistance as may be necessary.