Court Confirms Employment Contract is Enforceable in Miller v. Convergys CMG Canada LP: 3 Key Lessons for Employers
February 6, 2015
By Tara Erskine, Partner at McInnes Cooper,
Jack Graham, Client Sector Lead Partner, Government & Institutions at McInnes Cooper
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On February 5, 2015, the Supreme Court of Canada dismissed an employee’s application for leave to appeal a decision from the BC Court of Appeal. The Court of Appeal had concluded that his employment contract, which limited his without cause termination notice to the statutory minimum, was binding and enforceable.
This decision is good news for employers: it shows that courts will enforce properly drafted employment offers and contracts, including termination and severability clauses – and employers will benefit from using them. It is also useful for other types of contract disputes because it confirms the operation of severability clauses in contracts generally. McInnes Cooper’s Tara Erskine represented the successful employer in the original trial, the appeal and the application for leave to appeal to the SCC. McInnes Cooper’s Jack Graham, Q.C. drafted the employment contract that the courts enforced.
Mr. Miller worked for Convergys for seven years in a client services role. He signed a series of employment contracts starting when he began his employment and with each of several promotions, except his last one. Each contract included these clauses:
- Termination Clause. A clause – commonly called a “termination clause” – stating an employee dismissed without cause is entitled to the minimum notice entitlements the BC Employment Standards Act requires.
- Probationary Clause. A clause stating the employer can terminate the employee’s employment during the specified probationary period without notice or cause – in Mr. Miller’s case, the probationary period was 90 days.
- Severability Clause. A clause stating that any legally unenforceable terms would be severed from the contract.
Mr. Miller lived in Kamloops, B.C. and routinely travelled to client sites in the US for his work. Over a period of any months, Convergys asked him to relocate to his choice of one of two US cities where his work was based. When Mr. Miller was unable to either relocate or find another position with the company in Canada, Convergys terminated his employment without just cause. It paid Mr. Miller the seven weeks’ pay in lieu of notice specified by the termination clause in the last employment contract he signed. Mr. Miller sued Convergys for wrongful dismissal claiming pay in lieu of 12 months’ reasonable notice as well as punitive damages.
THE COURT DECISIONS
The BC Supreme Court decided that the employment contract – and its termination clause – was enforceable. Read more about the background and the BC Supreme Court’s decision in McInnes Cooper’s: Employment Contracts – Worth the Paper They’re Written On. Mr. Miller then appealed to the BC Court of Appeal. Mr. Miller said the termination clause was illegal – and unenforceable – because it was “inextricably intertwined” with the probationary clause that imposed another “without notice” probationary period that violated the employment standards law’s minimum notice requirement. On July 31, 2014 the Court of Appeal disagreed and enforced the termination clause:
- The Probationary Clause Probably Didn’t Apply. A reasonable, objective person wouldn’t conclude the parties intended the probationary clause to get around the minimum employment standards law requirements. The last contract Mr. Miller signed acknowledged that Convergys had continually employed him for three years prior, noted his “transfer” and “new position”, and expressly preserved his vacation and benefit entitlements.
- The Severability Clause Did. The severability clause operated to sever the probationary clause from the contact, if it did apply. A severability clause in an employment contract isn’t automatically unfair to employees; this one applied to the whole contract, not just the termination clause, so wasn’t an effort to avoid the requirements of the employment standards law.
- So Did the Termination Clause. The termination clause was enforceable. The Probationary and Termination clauses stood on their own; severing the probationary clause from the contract left the termination clause standing. And it was unambiguous, using wording “well-known” in employment law to define an employee’s entitlement on without-cause termination.
Mr. Miller applied to appeal this decision to the Supreme Court of Canada, but on February 5, 2015 it refused his application – so the BC Court of Appeal’s decision stands. Read the BC Court of Appeal’s decision in Miller v. Convergys CMG Canada LP, 2014 BCCA 311.
3 KEY LESSONS FOR EMPLOYERS
An employee is entitled to reasonable notice when an employer terminates employment without cause. An employee and employer can, however, agree to a different period of notice as long as it does not fall below the minimum amounts set out in the applicable employment standards legislation. Courts will carefully scrutinize such agreements because of the general view that employees are vulnerable vis-à-vis employers. The Court of Appeal’s decision in Miller v. Convergys confirms that an employment contract is a contract, and reinforces the message that every employer can benefit from the certainty and cost savings provided by a properly drafted and implemented written employment offer or contract, particularly ones that include a termination clause setting out notice in the event of without cause termination.
The decision has three key lessons for employers:
- Employment Contracts will be Enforced. The Courts will enforce employment contracts where the language limiting notice of termination to statutory minimums is clear and unambiguous and where the employee has time to consider before signing.
- The “Legalese” is Important. Including clauses like the “severability clause” in Mr. Miller’s contract in employment contracts may seem to some like unnecessary “legalese”, especially to employers that strive to use short, simple agreements. But these clauses are just as important in employment contracts as they are in any commercial contract – and though courts may scrutinize employment contracts more closely, they will generally enforce these clauses even in employment contracts. And, as in this case, severability clauses can make the difference for the employer.
- Customization is Helpful. It helpful and expeditious for employers to develop and use a “standard form” employment agreement that includes the standard form “boilerplates”. Employers should still, however, be careful to review the employment contract each and every time they use it to make sure the particular clauses apply to the particular employee in the particular circumstances – especially when it is an existing employee – and to make any necessary changes to suit the particular case. Where possible, employers should have employees sign a new contract each time there is a promotion.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Labour and Employment Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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