Most employers want simple, friendly hiring documents that are easy to understand and don’t look like they were drafted by lawyers. Trust me – I get it!
To achieve this goal, employers sometimes want to remove important legal clauses from their offer letters or employment agreements. Most commonly removed are the legalistic boilerplate type clauses generally found at the end of the document, addressing such things as entire agreement, amendments, waivers, severability, governing law, etc. While such clauses may seem unimportant, they serve a purpose and, by removing them, the employer may find itself faced with unintended consequences in the future.
A recent case from the Ontario Superior Court highlights the importance of one of these clauses; namely, the severability clause. Severability clauses are those provisions in contracts that state that, if part of the contract is found to be illegal or otherwise unenforceable, the remainder of the contract should still apply.
In Oudin v Le Centre Francophone de Toronto, after approximately 13 years of employment as project manager for the magazine, Francois Oudin’s position was eliminated for economic reasons. His employment was terminated, and he was provided with his ESA termination and severance minimums in accordance with the terms of his employment agreement.
Mr. Oudin brought a motion for summary judgement, arguing that the termination provision in the employment agreement was unenforceable in its entirety because part of that termination provision was unlawful. The unlawful part contained language that purported to allow the magazine to terminate Mr. Oudin’s employment, without notice or compensation in lieu of notice, if he became permanently incapacitated (aka disabled). Such language does not, however, comply with sections 2(3) and 9(2)(b) of O. Reg, 288/01 of the ESA.
Ontario Superior Court judge Sean Dunphy dismissed the motion.
Even though the “permanent incapacity” part of the termination provision was void and unenforceable as contrary to the ESA, this was not found to render the balance of the termination provision invalid because the employment agreement contained a severability clause. The severability clause showed the parties’ express intention to delete invalid clauses and that, in such cases, all other clauses in the employment agreement would continue to be in full force and effect.
Having dismissed the motion, Justice Dunphy ruled that Mr. Oudin was entitled to only 8 weeks’ termination pay and 13 weeks’ severance pay under the ESA in accordance with the enforceable part of the termination provision in the employment agreement.
The takeaway here for employers is that severability clauses matter. My standard severability clause when drafting offer letters or employment agreements goes something like this:
If any provision or part of this Agreement is found to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability will attach only to such provision or part of such provision and the remaining part of such provision and all other provisions in this Agreement will continue in full force and effect. In particular, in the event that any provision or part of this Agreement fails to meet your minimum entitlements under the then applicable provisions of Ontario’s Employment Standards Act, 2000 or its successor legislation if then in effect (collectively, the “ESA”), it is understood and agreed between us that your entitlements in respect of the subject matter to which the invalid or unenforceable provision applies will be strictly limited to your minimum entitlements under the then applicable provisions of the ESA.
Not only does this clause demonstrate the employer and employee intentions if something is found to be unenforceable, it also sets out the intended consequences if the unenforceability is because the provision fails to meet the employee’s minimum entitlements under the ESA. In that latter case, the severability clause indicates that the parties intend that the employee would be entitled to his ESA minimum entitlements, but nothing more.
Take this opportunity to check out your hiring documents. Are you using one with severability clauses? And, if so, are they drafted properly? You won’t want to find yourself answering no to these questions.
 2015 ONSC 6494