It is trite law that a termination provision that limits an employee’s severance to the statutory minimum in the Employment Standards Code must be clear and unambiguous. A clear and unambiguous termination provision would subsequently preclude the employee from common law notice or severance. The consequences of this preclusion could be great, as the Employment Standards Code (“ESC”) has a maximum notice period of two months of severance, whereas the common law maximum notice or severance period is 24 months. Employees should thus be aware of signing away their severance rights.
So what language will preclude an employee’s right to common law notice? In Stangenberg v Bellamy Software, the Alberta Court recently upheld a termination provision limiting the employee’s termination notice to the ESC provisions. The employee had been with her employer for 17 years and would otherwise have been entitled to substantially more severance
The Plaintiff (Bernice Stangenberg) had worked for a predecessor company to the Defendant Employer (Sylogist) for eight years before Sylogist acquired her company. Upon Sylogist acquiring her company, she received an offer of employment from Sylogist. The offer letter had the following termination provision:
In the event that Sylogist terminates your employment without cause, Sylogist will provide the notice or pay in lieu of notice required by the Alberta Employments Standard Code (sic) or other applicable legislation. You are not entitled to any other termination notice, pay in lieu of notice, or other benefits.
Stangenberg accepted the offer and worked for Sylogist until 2015, at which point Sylogist terminated her without cause and gave her eight weeks pay in lieu of notice in accordance with the ESC. At that point Stangenberg had 17 years of service with the employer, was a “team lead,” and received a base salary of $72,084.96. Stangenberg made an application for summary judgment that the termination provision in the offer letter was unenforceable because it was not clear and unambiguous. The Court dismissed Stangenberg’s application.
The Court reviewed the employment agreement and in particular the term in question that purported to limit the severance and determined that the provision was clear and unambiguous. Additionally Justice Graesser stated that an employer can contract out of common law notice unless there is no consideration for the agreement or there is evidence of unconscionability. Stangenberg did not put forward evidence of unconscionability and Justice Graesser had already found consideration. As a result, Stangenberg’s application for summary judgment failed. The Trial Court will ultimately decide this issue.
- An employer can contract out of its obligation to pay common law notice upon termination if the termination provision is clear and unambiguous.
- The circumstances under which the employee signs the agreement limiting their right to common law severance will be examined by the court.
- All employees should insure they understand what they are giving up when signing new employment agreements.
Date: May 10, 2016
Subject: Case Summary: Stangenberg v Bellamy Software, 2016 ABQB 160