Wednesday, July 9, 2014

Miller v. A.B.M. Canada Inc: Court strikes down contractual language

This week, Justice Glithero released his reasons in Miller v. A.B.M. Canada Inc., a wrongful dismissal action hinging on the enforceability of the termination language in an employment contract.

Mr. Miller starting working for ABM on September 1, 2009, in a 'middle management' position (if perhaps at the upper end of middle management).  As of November, 2010, he was told that he was doing a good job, yet in January 2011 he discovered an invoice from a hiring consultant which indicated that they were advertising job, trying to replace him.  He approached the president of the company to discuss it, and was dismissed without notice effective January 26, 2011.

His contract contained language limiting his termination entitlements:
Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.
Contractual language giving only the statutory minimums is relatively easy to draft, because you can refer directly to the statutory minimums.  So it's surprising to see this clause include the phrase "salary in lieu", because 'salary' is not a term properly invoked in context of the ESA minimums.  The plaintiff argued that this language excluded non-salary components of his remuneration package, including pension contributions and car allowance (even though the contract reserved a right to the employer to discontinue these benefits at any time anyways).

Justice Glithero agreed, and awarded damages based on a reasonable notice period of 3 months.  It's clearly a low-end notice period, particularly given the senior-level position, and Justice Glithero bore in mind the fact that Miller admitted not having read the termination clause.
Had he done so, he could have voiced objection to whatever provisions he found unsatisfactory, either as to the length of the notice period, or the fact that it did not call for payment of benefits during that period.  The contract terms made it clear what the employer intended.  Mr. Miller in his curriculum vitae indicated that he had experience in and had been responsible for human relations at Dieter's.  Part of his job description with the defendant made him responsible for monitoring all legislation relevant to the organization, and specifically listed employment standards.  By signing the contract, Mr. Miller signified to the employer that had read, and understood, and accepted the terms of the contract.  Had he in fact read what he acknowledged having read, the parties could have either negotiated their differences, or parted ways and avoided a period of employment that has been unhappy and no doubt costly for both.  In the circumstances of this case, the employee cannot escape bearing some responsibility for the fact that both parties entered into a contract which fell below ESA standards.


It's slightly troubling that Justice Glithero did not address the effect of the "or as may otherwise be required by applicable legislation" phrase.  It seems to me that some judges would have read a lot into that phrase, such as a common intention between the parties that statutory minimum payments would be made.  (Justice Glithero did note that the employer's own payments and proposals included no provision for pension contributions, which might undermine such an interpretation.)  That being said, I could argue conversely that the meaning of the phrase, in the overall context of the sentence, is pretty ambiguous.

ESA saving language is quite common, and usually enforced, but there are often troubling elements, such as instances where the express language actually directly contradicts the ESA requirements:  If a contract expressly contradicts the ESA, such as by expressly disclaiming the continuation of some benefit through the notice period, can a clause otherwise promising not to contravene the ESA really save it?

It would be helpful to see Justice Glithero's actual line of reasoning on that point.

What's more difficult, however, is the segment of text I quoted above.  If you haven't read a contractual term, then that's usually your own problem.  But where the contractual term is illegal in any event, it's hard to see how not having read it can be at all relevant to the resulting implied terms.

The notion that the reasonable notice period should be reduced in recognition of the fact that the intended effect of the contractual clause is wrong.  That is almost exactly the proposition that the Supreme Court rejected in Machtinger.

Justice Glithero appears to consider it relevant that Mr. Miller has an expertise in human resources and employment standards compliance.  I'm not sure I see the relevance of that in general, but in the circumstances of this case it seems a misplaced criticism:  By and large, it would take an employment lawyer to spot the problem in the language in that contract.  Mr. Miller was not a lawyer at all, much less an employment lawyer.  (Despite being responsible for employment standards compliance, this is a very fine point of statutory interpretation.  This is why companies need to hire lawyers, and not rely on in-house non-lawyer expertise.)  So blaming him for the unenforceable contractual term seems highly inappropriate.

Or is it that Justice Glithero figures that Mr. Miller wouldn't have accepted the term had he read it, either negotiating something that is ESA-compliant or alternatively not accepting the job, and that either one of these solutions would have been better all around?  That seems fairly speculative to begin with - on the contrary, I would think that if he didn't read the termination clause, it's because the termination clause was not something he considered a negotiating priority - but where do you go from there?  The parties did enter into an employment relationship, and as unhappy as it might have been, the employer did not have just cause to terminate the relationship, and the employee did not resign.  And there would be no basis for trying to figure out what the parties would have agreed to had they negotiated the point:  This is precisely what the common law notion of 'reasonable notice' is designed to accomplish.

The real question is this:  At the point of termination, how much notice would have been 'reasonable' to give to Mr. Miller?  It is hard to see how the answer to this question is affected by the question of whether or not, prior to entering into the employment relationship, Mr. Miller read a contractual clause which is unenforceable in any event.


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The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.


  1. Update: On September 25, 2014, Justice Glithero released a costs decision. He is not particularly impressed by plaintiff's counsel - by the amount of time they spent on the matter (considering that it was ultimately a $30,000 judgment), by the pursuit of positions that were unsuccessful, and by the plaintiff's counsel's requirement to postpone examinations for discovery when the defendant, on the eve of discoveries, abandoned it's 'just cause' position.

    "I confess to some inability to understand how that last minute concession would have done anything on the examinations for discovery except make the plaintiff’s job easier."

    (It isn't that hard for me to imagine, particularly when it appears that there were overlapping factual issues between different issues. What questions are now irrelevant? What questions might still be relevant to the other issues? Unless you're just going to barrel forward with the same examination strategy as you were going to use before, in which case you'll end up having to defend against relevancy challenges you hadn't had an opportunity to consider, you need to take a step back to re-evaluate.

    As well, Justice Glithero continued to blame the plaintiff for the necessity of litigation - that if he'd read and pointed out at the outset that the contract language was unenforceable, none of this would have been necessary.

    Plaintiff's counsel was seeking over $60,000 on a substantial indemnity basis, and over $40,000 on a partial indemnity basis. They received an award of $25,000.

    I'm curious as to whether the plaintiff is appealing - I could definitely imagine an argument being made that punishing the plaintiff for failing to read an unenforceable contract clause is an error in principle.

  2. Further update: On March 19, 2015, the Divisional Court released its reasons in the appeal of the employer, which argued that Justice Glithero erred by finding the contract unenforceable. The plaintiff does not appear to have cross-appealed.

    The Divisional Court dismissed the employer's appeal, finding that Justice Glithero was entitled to interpret the contract as he did.

    There's an interesting comment on standard of review: The employer argued that the standard of review is 'correctness' - that the interpretation of the contract was a question of law. The Divisional Court disagreed, concluding that it was a question of mixed fact and law (leading to a higher level of deference to Justice Glithero), but that in any event the decision was 'correct'.