Employment Contracts Must Be Clear if Opting Out of Common Law Notice

Losing a job can be one of the most impactful events in a person’s life, both financially and emotionally. The principle of notice (or pay in lieu of notice) is intended to provide a basic level of financial stability after an employee’s termination. In Canada, the applicable notice period for employees dismissed without cause is informed by legislation and common law (i.e. precedents set in court decisions). 

Notice periods can also be governed by an employment contract. Some agreements may seek to limit the amount of applicable notice to the statutory minimum. However, the Alberta Court of Appeal has cautioned that simply having a contractual clause to this effect may not be enough to limit an employer’s obligations when terminating an employee without cause.

Employee contract required 60 days’ “or more” notice

In the case of Bryant v. Parkland School Division, the employees worked for Parkland School Division. Two were hired in 1999, while the third employee joined in 2004. All three employees signed standard form employment contracts stipulating that in the event the employees were terminated without cause, they would receive written notice of “60 days or more”. 

All three employees were terminated without cause in June 2014 and received 60 days’ notice. The employees brought an action claiming additional notice in line with what would be available at common law. At common law, the amount of notice usually considers the age and specialization of the employee, as well as the length of time served with the employer.

Chambers judge found contract not ambiguous enough to require common law notice

At the initial hearing, the employees told the chambers judge that they interpreted the contract to mean that a minimum of 60 days’ notice would be required, but their length of time with the employer would increase the notice. One employee testified that she asked about the clause and was told it was meant to set a minimum and would increase with the length of service.

The chambers judge dismissed the action. He acknowledged that the clause would have been clearer if it did not contain the words “or more”. However, he found that the inclusion of those words did not render the clause ambiguous, “merely because an employee is unable to ascertain how much notice in excess of 60 days they may receive”.

Had the chambers judge found the clause ambiguous, he may have imposed a longer notice period. However, in finding it clear enough and not reasonably subject to more than one meaning, he determined that the employer had the discretion to provide an individual employee with any notice beyond the 60 days. The Court of Appeal summarized the chambers judge’s decision as finding that “the common law does not imply a right to reasonable notice when a contract unambiguously addresses termination, and that the clause clearly and unequivocally set a notice period.”

Court of Appeal: Ambiguity should be resolved in favour of the employee

On appeal, the Court of Appeal began its analysis by stating that different principles apply to the interpretation of employment contracts than other commercial contracts. One of the main reasons for this is the power imbalance between employees and employers regarding bargaining power. Employees often have little or no opportunity to negotiate the terms of their employment. Because of this, legal principles have evolved to offer some protection to employees. 

One of the principles is that uncertainty in employment contracts ought to be resolved in favour of the employee. The Court referenced its own affirmation of this principle in the 2018 decision of Holm v. AGAT Laboratories Ltd., which applied this principle directly to termination clauses.

Clear and unequivocal language required for employment contracts to opt out of common law notice

The second principle cited by the Court of Appeal is that employment contracts are presumed to include an implied term obligating the employer to follow common law notice of dismissals. If an employment contract requires an employee to opt out of the protections afforded at common law, its language must be clear and unequivocal. 

The Court found that the chambers judge failed to begin his analysis with these guiding principles. Had he done so, he would have found the clause failed to limit the employees’ right to common law notice unambiguously. The Court explained that to opt out of common law notice, the contract must have stated that the employees were only to expect 60 days’ notice. The chambers judge himself acknowledged the ambiguity caused by the words “60 days or more”.

Given the employment contract’s lack of clear and unequivocal language to the contrary, the Court of Appeal found the employees were entitled to common law notice. The Court referred the issue of the length of notice back to the Court of Queen’s Bench (as it then was) for determination if the parties could not reach an agreement.

Contact DBB Law in Calgary for Forward-Thinking Employment Law Solutions

The skilled employment lawyers at DBB Law provide constructive, pragmatic advice on all aspects of the employer-employee relationship. We regularly review and advise on existing employment contracts and draft new or amended agreements. Our firm regularly advises employers on employee terminations and the proper calculation of severance. We also advise employees by reviewing termination packages and advocating for their rights when they have been wrongfully dismissed.

DBB Law is located in the heart of Calgary and has proudly offered a complete range of legal services to individuals, families, and businesses for over 35 years. To schedule a consultation with a member of our innovative employment law team, contact us online or call 403-265-7777.