Understanding Restrictive Covenants: Non-Solicitation and Non-Compete

Non-solicitation and non-competition clauses are used to protect employers from losing customers or business as a result of a departing employee.

Over the course of their employment, employees may acquire specialized knowledge of a company’s trade secrets, expertise or other unique proprietary information about their employers. In many cases, particularly in sales, employees establish and maintain successful and close relationships with customers or clients. While these are positive elements of an employment relationship, when an employee changes jobs, the company intelligence they take with them and their subsisting relationship with company clients, can pose issues for employers.

As a result, employers often look for ways to protect their business interests, customer bases and other threats of competition. One way employers can do this is by imposing restrictive covenants on their employees in their employment contracts.

In this article, I will explain two of the most common restrictive covenants: non-solicitation and non-competition.

What are Restrictive Covenants?

Restrictive covenants are employment contract clauses that restrict, limit or prevent an employee from doing certain things following the end of their employment. Most often, these come in the form of a “non-solicitation” clause and/or a “non-competition” clause in the employment contract.

Non-Competition vs Non-Solicitation

The purpose of a non-competition clause is to limit a former employee’s ability to work for a competitor or open a competing business. These are generally only upheld in exceptional cases.

A non-solicitation clause prevents or limits an employee from “soliciting” clients (and often employees) of their former employer.

Soliciting has a very specific meaning. In the simplest of terms, it occurs when a person contacts a former customer or business contact, and asks them to keep giving them business at their new company. For example: a LinkedIn post about your change in role, wouldn’t count as soliciting, but sending a direct message, saying “Hey, I’ve moving to new company. Do you want to try out some of our products” probably would be.

The Court of Appeal in HJ Staebler Co v. Allan2008 ONCA 576, explains the difference between a non-solicitation clause and a non-competition clause as follows:

…A restrictive covenant may restrain either competition or solicitation. A noncompetition clause restrains the departing employee from conducting business with former clients and customers whereas a non-solicitation clause merely prohibits the departing employee from soliciting their business.

Whether a Restrictive Covenant is a Non-Competition or Non-Solicitation is Not Always Clear

In Donaldson Travel Inc. v. Murphy, 2016 ONCA 649, the parties had a dispute over whether a certain restrictive covenant was an enforceable non-solicitation clause or an unenforceable non-competition clause. The clause stated:

In the event of termination or resignation [the employee] will not solicit or accept business from any corporate accounts or customers [of the employer]

The Ontario Court of Appeal founded that the words “accept business” meant that the clause went beyond a mere non-solicitation agreement and was, therefore, unenforceable.

Enforcing Restrictive Covenants

Generally, Courts hesitate to uphold restrictive covenants on the basis that these types of clauses are often considered impediments to basic elements and principles of a healthy economy. Courts don’t like preventing people from using their skills, experiences and relationships with their next employer unless absolutely necessary.

Courts Prefer Non-Solicitation Clauses

In Lyons v Multari [2000] OJ No. 3462, the Ontario Court of Appeal reasoned that:

Generally speaking, the Courts will not enforce a non-competition clause if a non-solicitation clause would adequately protect an employer’s interests

Courts are more strict towards and less likely to enforce non-compete agreements because they limit an individual’s ability to earn a living or pursue a job for which they are qualified. Non-solicitation clauses, on the other hand, don’t go so far as totally limiting an individual from working in a certain industry all together, and therefore, are less restrictive and more likely to be enforceable.

The Legal Test: Reasonable and Necessary to Protect a Legitimate Interest

To be enforceable, both non-competition and non-solicitation clauses need to be reasonable to and necessary to protect a legitimate business interest. In addition, the language of the restrictive covenant must be clear and reasonable in terms of:

  1. It’s geographic scope;
  2. The length of time it is valid; and,
  3. The type of activities that it limits

If a restrictive covenant is ambiguous or excessive with regard to time, activity, or geography, it will probably be found to be unreasonable and unenforceable.

For example, consider a Life Insurance Salesman working for a brokerage in the High Park area of Toronto. If a non-solicitation clause limited him from soliciting clients anywhere in Ontario, that might be an unreasonably large geographical area. A clause limited in scope to only to the City of Toronto is more reasonable and more likely to be enforceable.

Implied Duty Not to Solicit

Without an explicit non-solicitation agreement, ordinary employees are free to contact customers and clients of their former employers for the purpose of soliciting their business. However, senior executives, directors, officers and other key members of a business may have “fiduciary” duties, which survive the end of the employment relationship, which may include a common law duty to not solicit customers for a reasonable time period after termination of employment.

Senior executives owe fiduciary duties to their employer because the employer has placed significant trust in them to exercise discretion in the best interests of that employer or where the employer is particularly vulnerable to the executive.

Canadian courts consider fiduciary duty in a broad and flexible manner to respond to the facts of each particular case.

Key Points to Take Away

  • Employers should consider what restrictions are appropriate on an employee by employee basis.
  • Restrictive Covenants should be as minimal as possible while still maintaining protection of the employer’s proprietary interests.
  • Courts are reluctant to enforce non-compete restrictive covenants as they are seen to obstruct basic economic activities including preventing individuals from working positively and achieving career aspirations. Hence, employers should consider omitting non-competition clauses when a non-solicitation clause would be adequate to protect their proprietary interests.
  • Non-solicitation clauses should identify which customers the employee cannot solicit.
  • Courts pay significant attention to the language of restrictive covenants and decisions to enforce are based on whether they are clear, specific and narrow in scope.
  • Employers should use plain and unambiguous language in their restrictive covenants.

Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

All Ontario Employers Need New Employment Contracts: Court of Appeal

Due to a very disruptive decision released by the Ontario Court of Appeal last week in Waksdale v Swegon North America Inc., 2020 ONCA 391, your employment contract is probably no longer enforceable.

Waksdale v Swegon North America Inc.

Waksdale v Swegon North America Inc. was a wrongful dismissal action by employee Benjamin Waksdale against his former employer Swegon North America Inc. Mr. Waksdale was terminated without cause after working only 8 months. He sued for 6 months pay in lieu of reasonable notice.

The plaintiff’s employment contract had the following “Termination Without Cause” provision:

You agree that in the event that your employment is terminated without cause, you shall receive one week notice or pay in lieu of such notice in addition to the minimum notice or pay in lieu of such notice and statutory severance pay as may be required under the Employment Standards Act 2000 as amended. All reimbursement for business expenses shall cease as of the date of termination of your employment, however, you shall be reimbursed for legitimate business expenses that have been incurred and submitted to the Company but not as yet paid you to that date. The terms of this section shall continue to apply notwithstanding any changes hereafter to the terms of your employment, including, but not limited to, your job title, duties and responsibilities, reporting structure, responsibilities, compensation or benefits.

The employment contract also had a “Termination for Cause” provision. It was conceded by the employer that the wording of this Termination for Cause provision breached the terms of the Employment Standards Act, 2000 (“ESA”) and was therefore void and unenforceable. In what is probably the most problematic portion of this decision, neither the Ontario Superior Court nor the Ontario Court of Appeal set out the wording of the Termination for Cause provision. Accordingly, we are all left to guess at what made it unenforceable.

At trial, the lawyer for Mr. Waksdale argued that the employment contract (or at the very least both of its termination provisions) was not enforceable because the Termination for Cause provision was void.

The Ontario Court of Appeal agreed and held as follows:

An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.

What Makes a Termination for Cause Provision Void and Unenforceable?

As I have previously written about in my article “Termination of the Employment Relationship in Ontario”, where an employer has “just cause” for termination they can fire an employee without paying reasonable notice at common law (subject to the principles of Progressive Discipline).

Examples of “Just Cause” at common law include:

  • Repeated breaches of company policy
  • Repeated Truancy
  • Violence or Harassment
  • Dishonesty
  • Insubordination

When terminating for just cause, however, employers are still required to pay ESA Notice and Severance unless that employee “has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

Unless your employment contract explicitly carves out a distinction between termination for Just Cause and termination for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”, it may be void and unenforceable, as was found by the Court of Appeal in the Waksdale decision. As a result, your employment contract’s “Termination Without Cause” provision might also be found unenforceable.

Employment Contracts Post-Waksdale

The existence of the Waksdale decision is a serious liability for Ontario employers. Previously, little attention had been paid to the enforceability of the “Just Cause” provisions. From now on, that will no longer be the case. In my experience, very few employment contracts that come across my desk draw the distinction between Just Cause and “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.

As a result, the majority of employment contracts in Ontario need to be amended and updated. Otherwise, employers risk their termination provisions being unenforceable, which means they will owe employees common law reasonable notice. Common law reasonable notice often works out to months or years of notice rather than weeks under the ESA.

Waksdale Raises More Questions

While the Ontario Court of Appeal has made up its mind on the effect of poorly drafted Without Cause provisions, the Waksdale decision raises other important questions concerning employment contract more generally: if other terms of an employment contract breach the ESA, what is the effect on the enforceability of the termination provisions? For example, what if your employment contract provides for less than the minimum vacation entitlements, does that invalidate your termination provision?

This is a problem because, in Waksdale, the Court of Appeal stated “the correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA”. The Court also explained that “an employment agreement must be interpreted as a whole and not on a piecemeal basis”.

Whatever the answer to that question is, there is no doubt that employees now have another arrow in their quiver when challenging employment contracts— and employers face yet another risk when terminating an employee.

Employers Need New Employment Contracts

In conclusion, employers need to update their employment contracts. Doing so is inexpensive and pays substantial dividends at termination time. As noted, the difference in notice period, for an employee with an enforceable termination provision versus one without, can be months or years of pay.

If you are interested in learning how to implement new or update employment contracts, read my article, How to Change Employment Contracts.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.

The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Termination within Probation Periods

Probation at the start of employment may seem simple, but they don’t always automatically allow employers to fire someone in their first 3 months free and clear. Probationary periods are actually legally intricate.

Employees terminated during probationary periods often accept their fate without seeking legal advice when in many cases they may be eligible for severance payments (even severance payments of several months or more). Likewise, employers may dismiss an employee within a probationary period only to be surprised and unprepared when they’re told termination pay for wrongful dismissal is owed.

Purpose and Effect of Probation Periods

The reason for probationary periods in employment contracts is to provide a safeguard to employers. It allows an employer a period of time to assess a new hire on their suitability for the role. This benefits employees to the extent that an employer may be more willing to take a chance on an employee they are not certain about, if they have a period of time to change their mind without consequence.

The Ontario Employment Standards Act (“ESA“) does not define probation or probationary period. Instead, it allows an employer to terminate an employee without cause in the first three months of employment, without notice or pay in lieu of notice. It frequently doesn’t matter, therefore, for the purposes of the Employment Standards Act whether an employment contract contains a probationary clause (although it is important that the probationary clause does not provide for less notice than the minimums required under the ESA). If an employee is employed less than 3 months, under the ESA, he or she gets no ESA notice. If an employee is employed 3 months or more they are entitled to ESA notice. The existence, or lack thereof, of a probationary clause doesn’t change this.

The true purpose of a probationary period in an employment contract is to rebut the common law rule that employees are entitled to reasonable notice.

It may come as a surprise to some that even if you’ve been employed for a single day (or even if you haven’t started yet), the Courts have declared that terminated employees are entitled to some form of notice or pay-in-lieu of notice. In fact, recent trends in case law, suggest that short term employees (people employed only a few months) may be entitled to even more notice. A properly drafted and enforceable probationary clause may rebut this presumption and disentitle employees on probation to notice.

Termination within Probation Periods

In order for an employee to be subject to a probationary clause it generally must be:

  1. expressed (in writing) – the courts will not imply the existence of a probation period;
  2. it must be neither vague or ambiguous; and
  3. it must not provide for less notice than the minimums set out in the ESA

Further, and most critically, in order for an employer to be relieved from paying reasonable notice to the terminated probationary employee, it must act in good faith. This means that it must have provided the employee with a fair opportunity to demonstrate their suitability for the role and acted fairly in determining that the employee was unsuitable for the role.

Suitability

Defining “suitability” can be challenging. The Courts recognise that assessments of probationary employees involve the consideration of factors that are intangible and subjective. As a result, they often extend wide discretion to employers. Overall, the grounds used to establish unsuitability must be reasonable and must demonstrate that employees are given a fair chance to meet the requirements of the job.

Example of factors that may be taken into consideration to determine suitability of a probationary employee are as follows:

  • Performance
  • Attitude and compatibility
  • Capability and skill
  • Capacity to meet future production requirements

Clear and Unambiguous

Courts pay strict attention to the wording and language of any probationary periods. They must be clear and unambiguous. The court will not likely imply a probationary clause from the contract term “employee performance will be reviewed after three months”. However, in at least one case, the Ontario Court of Appeal concluded that the clause “Probation… six months” was enforceable and that the word “probation” in that case had a clear and unambiguous meaning that the employer could rely on to limit the employee’s notice. See for example: Nagribianko v. Select Wine Merchants Ltd., 2017 ONCA 540 (CanLII)

Best Practices for Employers

Best practice is for an employer to take steps to document the specific actions taken to determine suitability or unsuitability. Employers should:

  • Communicate the expected reasonable standards;
  • Inform the employee of any deficiencies as they arise;
  • Explain that any failure to address and try to improve deficiencies will result in termination of employment at the end of the probation period; and
  • Provide the employee with a chance to show that they tried to improve.

The important thing for employers to do, is to honestly treat the probationary period as a time for evaluation and training. The employer should work with the employees on a regular basis to determine if they can be transitioned into the role successfully. Actions taken to carefully assess, advise and remedy performance issues should be evident. Any decision about dismissal should not be made at the last moment, give regular performance review so that a decision to terminate prior to the end of the probationary period isn’t a surprise to anyone.

If you are interested in learning how to update your employment contracts to include a probation period, take a look at my article “How to Change Employment Contracts” or feel free to contact me.

Tips for Employees

Anyone terminated from their employment, whether within a probationary period or otherwise, should seek legal advice. 


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Employment Law for Bartenders, Waiters and Waitresses

Bartenders, waiters and waitresses, or “Liquor Servers” as they are referred to in the Employment Standards Act (“ESA”), are given special treatment under the law and by the Ontario Courts. While many of the ESA’s provisions apply equally to all types of employees, there are some important distinctions for liquor servers that hospitality employees and employers should know. This article is meant to highlight some of those important differences.

Minimum Wage

As of January 1, 2018, minimum wage for most workers in Ontario was increased to $14.00 per hour. However, the ESA permits lower minimum wage rates for certain designated groups of workers who receive tips as a significant portion of their income. Liquor servers fall into this category. Since January of 2018, the minimum wage rate for liquor servers is $12.20 per hour.

While the terms “Liquor Server” or “Bartender” are not specifically defined in the ESA, the relevant section on minimum wage provides helpful insight into whether an employee’s minimum wage rate can legally be lowered to $12.20 per hour. The ESA states as follows:

Determination of Minimum Wage
23.1 (1) The minimum wage is the following:
1. On or after January 1, 2018, but before October 1, 2020, the amount set out below for the following classes of employees:
ii. For employees who, as a regular part of their employment, serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act and who regularly receive tips or other gratuities from their work, $12.20 per hour. [emphasis added]

Minimum Wage After October 2020

As suggested in the above section, after October of 2020, the minimum wage rate for liquor servers will increase in accordance with a formula based on the Consumer Price Index. This formula is as follows:

Previous Wage × (Index A/Index B) = Adjusted Wage

In which:

“Previous wage” is the minimum wage rate that applied immediately before October 1st of the year;

“Index A” is the Consumer Price Index for the previous calendar year;

“Index B” is the Consumer Price Index for the calendar year immediately preceding the calendar year mentioned in the description of “Index A;” and

“Adjusted wage” is the resulting new minimum wage rate.

Termination, Reasonable Notice, and Wages

Like all employees in Ontario, liquor servers are entitled to a certain amount of notice, or pay in lieu of notice, when their employment is terminated.

That being said, for liquor servers, more often than not a significant portion of their income comes in the form of tips. Therefore, the biggest question I get as a Toronto employment lawyer, from both employees and employers, is whether tips should be included as wages for the purpose of pay in lieu of reasonable notice. The answer to that questions depends significantly on whether the bartender or liquor server has a valid employment contract that limits notice only to those minimums under the ESA.

Under the ESA, Wages Do Not Include Tips

Under the ESA, generally when an employer terminates an employee who has been continuously employed for at least 3 months, the employer must provide the employee with notice, or pay in lieu of notice. This pay in lieu of notice is often referred to as “termination pay.” The amount of written notice required by the ESA is as follows:

Employment Period Notice Length
3 months – less than 1 year 1 Week
1 year – less than 3 years 2 Weeks
3 years – less than 4 years 3 Weeks
4 years – less than 5 years 4 Weeks
5 years – less than 6 years 5 Weeks
6 years – less than 7 years 6 Weeks
7 years – less than 8 years 7 Weeks
8 years or more 8 Weeks

If an employee, by an enforceable employment contract, is only entitled to the minimums under the ESA, then that worker may NOT be owed tips. Wages under the ESA are defined as:

“Wages” means:
(a) monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied,
(b) any payment required to be made by an employer to an employee under this Act, and
(c) any allowances for room or board under an employment contract or prescribed allowances,
but does not include,
(d) tips or other gratuities,
(e) any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency,
(f) expenses and travelling allowances, or
(g) subject to subsections 60 (3) or 62 (2), employer contributions to a benefit plan and payments to which an employee is entitled from a benefit plan. [emphasis added]

Without an Enforceable Termination Clause, Tips Are Owed as Part of Termination Pay

Without an enforceable clause in an employment contract which limits reasonable notice to only the ESA minimums, the Ontario Courts ignore the strict wording of the ESA and require employers to pay tips as part of wrongful termination pay.

We can see an example of this in the case of Giacomo Violo v. Delphi Communications, Incorporated. Violo had worked as a waiter and bartender for a small restaurant in Ontario for 29 years. At the time of his termination, he was 51 years old. The parties did not have an employment contract, and the restaurant contended that Violo had been legally terminated due to excessive tardiness, alcohol abuse, and discourteous behaviour. After examining the evidence, including work records from the defendant and testimony from current employees, the Court determined that “there was no cause for the plaintiff’s dismissal.” The Court then turned to the issue of determining the reasonable notice period Violo was due. After examining numerous factors, including Violo’s age and the availability of similar jobs at the time he was terminated, the Court determined Violo was entitled to a reasonable notice period of 15 months. The Court then addressed the issue of damages, noting that tips would be factored in as such wages constituted a significant portion of his overall income: “… in 2010 he claimed $9,025 in tip income, almost as much as his income from wages.” In total, Violo was awarded $45,250, representative of his base salary and tips over the course of the 15 month notice period.

Final Thoughts

For employers, it is important to have a valid written employment contract with all bartenders, waiters, and waitresses. While the amount of notice cannot be below the minimum amount required by the ESA, employers can fashion contracts which provide for less notice than the employee would otherwise be entitled to at common law. When it comes to employees who receive customary tips, this can mean a substantial difference in the amount of termination pay. If you need assistance drafting employment contracts, we strongly recommend that you speak to an experienced employment attorney for guidance and assistance.

For terminated employees who received tips as a significant portion of their overall income, it is crucial to remember that they likely have rights under the common law that are far greater than the rights afforded to them under the ESA. It may be best for liquor servers and waitresses to sue their former employer in court for “wrongful dismissal,” seeking additional damages which would include tips. If you have been recently terminated from a position where you received tips as part of your income, we suggest that you speak to an employment attorney to help you determine the best course of action for your situation.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

How to Change Employment Contracts

Anytime you ask an existing employee to sign a new employment contract, it’s important to proceed cautiously. There are risks and pitfalls that wary employers may wish to avoid when making a change to their employment contracts. A misgauged approach may result in an unenforceable contract, or worse, result in a costly claim of constructive dismissal.

As set out below, the Ontario Courts have clarified generally two methods to change employment contracts. The first method is for when an employee consents and agrees to the changes, and the second is how to change employment contracts when the employee refuses.

Read more

Arbitration Clause in Employment Contract puts the Breaks on the Uber Class Action in Ontario

The Ontario Court has confirmed that an arbitration clause in an employment contract is generally enforceable.

Much to the chagrin of Mr. Heller and his lawyers in the proposed class action brought against Uber, Justice Perell of Ontario Superior Court of Justice stayed the lawsuit against Uber. As a result, Uber drivers in Ontario that want to sue for their rights under the Employment Standards Act, 2002 will need to do so by way of Arbitration in the Netherlands.

In the lawsuit of Heller v. Uber Technologies Inc., Heller, the proposed class plaintiff for Uber drivers across Ontario, sued Uber for a finding that they were employees, not independent contractors. If correct, then Uber drivers would be entitled to all the benefits granted to employees under the Employment Standards Act. Uber brought a motion to stay the action in Ontario—effectively ending the law suit—on the basis that when Uber drivers signed up on the “Uber App”, they clicked accept to a long list of terms and conditions that included the following clause:

Except as otherwise set forth in this Agreement, this Agreement shall be exclusively governed by and construed in accordance with the laws of the Netherlands, excluding its rules on the conflict of laws. The Vienna Convention on the International Sale of Goods 1980 (CISG) shall not apply. Any dispute, conflict or controversy, howsoever arising out of or broadly in connection with or relating to this Agreement, including relating to its validity, its construction or its enforceability, shall be first mandatorily submitted to mediation proceedings under the International Chamber of Commerce Mediation Rules (“ICC Mediation Rules”). If such a dispute has not been settled within sixty (60) days after a request for mediation has been submitted under such ICC Mediation Rules, such dispute can be referred to and shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”) …. The Place of the arbitration shall be Amsterdam, The Netherlands.

After finding that the International Commercial Arbitration Act, 2017, applies the Court considered:

  1. Whether the Competence-Competence Principle applied? or
  2. Whether there was some other reason to refuse to send the matter to arbitration.

The Competence-Competence principle holds that in general “a challenge to the arbitrator’s jurisdiction should be first resolved by the arbitrator.” The Court found that this principle did apply and that there were no exception to rely on that would benefit Mr. Heller. The Court held that the arbitration provision was not illegal for being unconscionable.

In short, Mr. Heller’s argument was summarized as follows:

it would be an absurd result and contrary to public policy to enforce an arbitration agreement in an employment contract and thereby deny vulnerable non-unionized employees their rights and protections under the Employment Standards Act, 2000, which precludes employees contracting out of their rights under the Act.

The Court reasoned that it was their role to interpret statute and not enact it and the Employment Standards Act does not, unlike the Consumer Protection Act, preclude arbitration clauses. Therefore, the Court held that the class action lawsuit should be stayed as a result of the arbitration clause in the employment contract, “be the result absurd public policy or not.”

What is the take away?

The decision of Heller v. Uber Technologies Inc., 2018 ONSC 718, confirms that Arbitration clauses in employment agreements are generally enforceable.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btzlaw.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning Zibarras LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

You might want to hire an employment lawyer before your next employee

Many Ontario employers think they’re saving money by copying an employment contract off the internet or hiring employees without one. What many believe to be a clever move soon realize it may have been a penny wise, but a pound foolish. A well written employment contract, as most might have guessed, often conveys significant advantages to employers. On the other hand, the absence of an employment contract or a poorly drafted one, often entitles terminated employees to significant common law notice periods.

Read more

How much notice/severance should I get after being fired?

That’s a more complicated question then all of those “online severance calculators” make it seem. Before we delve into the factors which play a role, both employees and employers need a little context and exposition on how the Ontario wrongful dismissal system works.

Overview

Firstly, you need to understand that “notice” and “severance”, though often used interchangeably in common parlance, mean different things. Under the Employment Standards Act, severance pay is defined and is an amount of money an employer needs to pay an employee on termination if certain conditions are met. In addition to severance, employers must give notice of termination to employees.

Severance Pay

An employee is only entitled to severance pay if they have been employed for 5 years or more and:

  1. the termination occurred because of a permanent discontinuance of all or part of an employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
  2. the employer has a payroll of $2.5 million or more.

If an employee is entitled to severance pay, they are to be paid severance in a lump sum amount equivalent to one week of non-overtime wages per completed year of employment up to a maximum of 26 weeks, within 7 days of termination.

Entitlements to severance are relatively well defined. It is the notice requirements of termination that require a more nuanced analysis.

Reasonable Notice of Termination

In Ontario, employers can give notice of termination to employees in two ways. Either,

  1. An employer can give notice ahead of time; or
  2. An employer can fire an employee right away, but provide “pay in lieu of notice” equivalent to what would have been earned over the notice period.

The first step in calculating the amount of notice depends on whether that employee’s termination is subject to a valid employment contract. If the employment contract contains a  clause that sets out the amount of notice an employee gets upon being fired and the contract is valid, then the employee is entitled only to the reasonable notice set out therein.  These contracts may be invalid or void ab initio (unenforceable from the beginning) for many reasons, including if they provide for less termination entitlements than the minimums established by Employment Standards Act.

If there is no contract, or the contract is not enforceable, then an employee is entitled to what the Ontario Courts call “reasonable notice”. Reasonable notice is always more than the minimum notice. The amount of  reasonable notice depends on many factors and is calculated by the Courts after considering all of the surrounding factors. Considerations include (1) age, (2) length of service, (3) character of employment and (4) availability of similar employment. Employees are entitled to more notice if:

  • they are older;
  • they worked somewhere a very short or a very long period of time;
  • their job was very specialized and it will be difficult to find comparable employment; or
  • the employer convinced them to leave another stable job.

An employee might also be entitled to further money on termination if the employer:

  • acted badly in the manner of termination;
  • fired you for a discriminatory reason;
  • fired the employee for insisting on his/her rights under the ESA;

Contact Justin W. Anisman

To contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing, call 416-833-8443 or email him at janisman@btzlaw.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning Zibarras LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

 

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