Another Ontario termination clause bites the dust

I’ve spent the last few weeks running and speaking at the CGIB educational events in Toronto, Calgary and Vancouver.  We’ve had employment lawyers speak at each of them on a number of topics employers face when it comes to benefits and how they handle them at termination. The one resounding theme that arose was the need for current up to date employment contracts.

Every employee /employer relationship has an employment contract, it’s only a matter if it is written or oral. Written is always preferred as it clearly states how the parties enter into the contract (pay, vacation, etc.) and how they exit (termination pay, benefit extension (or not) etc.).  This can prevent issues when the employment comes to an end.

In Ontario, the courts have ruled that having items like “non-compete clauses” in your contract can render the entire document invalid.  This can cause issues if you terminated a 20 year employee (as en example) who had a written employment contract that had both a non-compete and a termination clause that said that the employee would be paid 6 months of base pay only on being severed.  The non-compete clause would nullify the remainder of the contract leaving the employer responsible to the common law period (as much as 2 years) and could also include items like bonuses, benefits etc.  This can be corrected by reviewing these contracts with an employment lawyer and ensure they are up to date and enforceable.

The article below provides an example of how things go wrong even when written with the best intent.  Please consult an employment lawyer for advice to create enforceable contracts that are specific to your business and particular situation.

“Termination clauses can no longer be seen or read in an isolation of each other – they have to be read as a whole, so employers have to be very careful in reviewing their employment agreement templates from beginning to end, and ensuring that no provision of the agreement, whether it deals with termination or not, infringes on employees’ statutory rights to notice, severance pay, and benefits continuation under the under [employment standards legislation].”


Please read if your plan offers Long Term Disability (LTD) coverage

The Government of Canada is working to modernize the Employment Insurance (EI) program. In the 2022 federal budget they confirmed the extension of Employment Insurance sickness benefits from 15 to 26 weeks.
This change is anticipated to take place later this year (yes, not much time) but we are still missing many details, and until we get them we are unable to provide the proper solution for our clients.
The effective date and specific details are expected in the next month or so, but plan sponsors will probably need to realign LTD plans to the 26-week elimination period (from the current 15, 16 or 17 weeks). This will help avoid the payment of disability and EI benefits at the same time, where a member may be required to refund EI for benefits overpaid (for collecting from both at the same time).
Once the government settles on the details, we’ll be reaching out to provide options.  As it stands, I am expecting that most plans will be amended to delay the start of LTD benefits to 6 months (26 weeks) and will likely see a small drop in rates (maybe 5%).
Stay tuned for updates.

Legal case (a warning)

This is a cautionary tale with a BAD ending.  Terminations are never easy, but getting them wrong can be very costly which is why we ask clients to reach out BEFORE things take a turn for the worst.  On top of that, ensuring that you have Plan Administration Liability Coverage is critical as it, or Employment Practices Liability coverage, can help protect you when things go wrong.

In Pasap v Saskatchewan Indian Gaming Authority and Bear Claw Casino, in a wrongful dismissal action, the Court ordered the employer to pay their former employee $1,216,764.00 in damages on account of the employee’s loss of LTD benefits post termination.