Description
Move over Bridgerton, the next must-watch series is here! This week, Jill and Dana kick off a 3-part series on Contracts 101 with Termination Clauses.
Full episode transcript below:
Intro: This podcast is produced by Nelligan Law.
Dana DuPerron: Welcome to All Worked Up, the podcast where two employment lawyers break down real life workplace issues that affect real people. I’m Dana DuPerron.
Jill Lewis: I’m Jill Lewis. And we’re senior associates at Nelligan Law. And we’re super excited to bring you this podcast aimed at making employment issues interesting, accessible for employees and employers.
Dana DuPerron: Hi, I’m Dana.
Jill Lewis: I’m Jill.
Dana DuPerron: And this is All Worked Up. Jill, what’s got you all worked up today?
Jill Lewis: OK, you know what’s got to be worked up today –
Dana DuPerron: Tell me.
Jill Lewis: – termination clauses.
Dana DuPerron: Yes, yes. And that is why, today, we are starting our series on contracts 101.
Jill Lewis: Oh, don’t fall asleep.
Dana DuPerron: Well, how could they?
Jill Lewis: I know it’s so interesting.
Dana DuPerron: So interesting. With termination clauses.
Jill Lewis: Yeah.
Dana DuPerron: So, move over Bridgeton.
Jill Lewis: Because we’ve got some stuff and it is spicy.
Dana DuPerron: There’s something new in town.
Jill Lewis: It is spicy.
Dana DuPerron: It is spicy. OK, so what is a termination clause? OK. What’s a termination clause, that’s a good question. A provision in a contract that sets out someone’s entitlements when their employment ends.
Jill Lewis: Yeah. So, OK, I’m going to get terminated, I’m going to get fired, if I get fired, what do I get, bare minimums, do I get one month, do I get one week, whatever. Sometimes it’s in your contract, sometimes it’s not –
Dana DuPerron: Yeah, yeah.
Jill Lewis: – and it’s OK if it’s not in there.
Dana DuPerron: Yeah.
Jill Lewis: But the thing that I wish people knew more about is looking at it right away. So, before you even started your contract, to talk about termination clause right up front.
Dana DuPerron: Right. Do you find people don’t like looking at it right off the bat, because it’s like, oh, I don’t want to talk about getting fired when I’m just starting?
Jill Lewis: People hate talking about it.
Dana DuPerron: Hate it, hey –
Jill Lewis: They hate it and that’s what got me worked up. This is the kind of thing that you should look at and negotiate from the beginning. So, people will negotiate your salary –
Dana DuPerron: Yeah, vacation.
Jill Lewis: – vacation, where am I working –
Dana DuPerron: Yeah.
Jill Lewis: – those sorts of things, but they’ll never take a look at that termination clause or they’ll think, am I already becoming the trouble employee –
Dana DuPerron: Yeah, I don’t want to be the trouble employee.
Jill Lewis: Right. Because you do your due diligence.
Dana DuPerron: Yeah.
Jill Lewis: You read things properly, you know what your work is worth, I don’t think you’re going to be a problem employee.
Dana DuPerron: Yeah. It matters for employers, too, right?
Jill Lewis: It does.
Dana DuPerron: Like it’s the, if I’m looking at a contract for an employer, that’s the biggest clause that I’m looking for, because it’s generally the biggest source of liability often.
Jill Lewis: Yes.
Dana DuPerron: So, what would a termination clause, what do they often look like?
Jill Lewis: OK. So, a termination clause can have a for cause provision.
Dana DuPerron: Right.
Jill Lewis: So, being terminated for cause is pretty high level, it doesn’t normally happen. If you do get fired for cause, we’ll get into this –
Dana DuPerron: Capital punishment of employment law.
Jill Lewis: Capital punishment of employment law, you don’t get anything, right, there’s no severance, you don’t even get EI if you get fired for cause. And it’s a really high threshold, I don’t know if we’ve ever. Is it real?
Dana DuPerron: Yeah.
Jill Lewis: I don’t know.
Dana DuPerron: It’s the unicorn, who knows.
Jill Lewis: There’s case law where someone punched their co-worker in the face and was not fired.
Dana DuPerron: Well, they were sorry.
Jill Lewis: Yeah, they apologised.
Dana DuPerron: So, I mean, it depends. It depends on every situation, right.
Jill Lewis: Yeah.
Dana DuPerron: But a completely different episode probably on that, but –
Jill Lewis: I think so.
Dana DuPerron: – if someone says you’ve been fired for cause, speak to someone.
Jill Lewis: Speak to a lawyer immediately.
Dana DuPerron: Yeah, yeah.
Jill Lewis: Definitely. And then it’s going to have a without cause provision usually, and typically, they’re going to be restrictive, right, that’s why we want people to come and talk to us, because you can’t contract out of your bare minimums.
Dana DuPerron: Right.
Jill Lewis: But you can contract out of your common law –
Dana DuPerron: Yeah.
Jill Lewis: – of this period. And we’re going to get into that in a future episode, but that’s where you start seeing big numbers –
Dana DuPerron: Right.
Jill Lewis: – like one month per year and benefits to continue, that sort of thing. So, you want to have that looked at and your employer may be willing to negotiate it upfront, right.
Dana DuPerron: Right. And that’s what I want to flag on that too, is what I wish people knew when they look at these clauses, is that if it says, we will comply in all circumstances with your entitlements pursuant to the Employment Standards Act –
Jill Lewis: Yeah.
Dana DuPerron: – or the Canada Labour Code or whichever.
Jill Lewis: Yeah.
Dana DuPerron: I mean, those are the pieces of legislation that apply in Ontario, it’s not everything –
Jill Lewis: Yeah, yeah.
Dana DuPerron: – that’s not everything, that is limiting you.
Jill Lewis: Absolutely.
Dana DuPerron: So, there’s something more –
Jill Lewis: Yeah.
Dana DuPerron: – and that’s what I wish people knew.
Jill Lewis: Yeah.
Dana DuPerron: Because when people look at these classes, they think, OK, I’m getting what I get in the law –
Jill Lewis: Absolutely.
Dana DuPerron: – and don’t think that there’s anything more –
Jill Lewis: Yeah.
Dana DuPerron: – don’t realise that that’s a limitation and it can be.
Jill Lewis: Yeah. And at the end of the employment, right, when people are terminated, that’s another thing that I wish more people would come and talk to us about –
Dana DuPerron: Yeah.
Jill Lewis: – because they think, oh, I have a termination clause or I see a paragraph and it’s, the heading says, termination clause, so I guess I have one, I guess that’s it –
Dana DuPerron: Yeah.
Jill Lewis: – there’s nothing more I can do, right. They come in all the time and that’s sort of what we do –
Dana DuPerron: Yeah.
Jill Lewis: – is try and get them out of that clause and it’s happening much more, do you want to talk about [Waxdale 00:04:54] a little bit or?
Dana DuPerron: Yeah. I mean, so what you were saying before about this, there can be a for cause termination clause, if there’s anything wrong with that clause at all, and these are very technical legal arguments that are probably not very interesting.
Jill Lewis: Yeah, yeah.
Dana DuPerron: But anyway, what was I saying? Oh yeah, if there’s anything wrong with that clause that could, well, right now, the state of the law is that does invalidate the terminate with out cause termination clause, it gets you out of that.
Jill Lewis: Yeah.
Dana DuPerron: And you might be able to get out more.
Jill Lewis: Yeah.
Dana DuPerron: So, that’s at the end of the relationship, right.
Jill Lewis: Yeah.
Dana DuPerron: So, we would like people whose employment is terminated and who have been made an offer to speak to a lawyer with their employment contract and with what they’ve been offered on termination.
Jill Lewis: Yeah.
Dana DuPerron: You look at that and you can piece it all together, you can give advice on whether it’s a good offer or not. At the front end, you want people to bring you that contract so you can tell them if they’re limiting any rights –
Jill Lewis: Yeah.
Dana DuPerron: – that they otherwise have. Sometimes they’re in a pretty strong position to negotiate something better.
Jill Lewis: They’re being recruited.
Dana DuPerron: Yeah, exactly. Or they’re, a person, which I guess is often the case when someone’s being recruited, but someone with a really niche skill set?
Jill Lewis: Yeah. They’re senior maybe –
Dana DuPerron: Yeah.
Jill Lewis: – one that’s been doing it a while.
Dana DuPerron: You can absolutely take a contract to your employer, HR, you’re usually dealing with HR right away and just say, I can’t sign a contract for one week, per year –
Jill Lewis: Yeah.
Dana DuPerron: – up to eight weeks –
Jill Lewis: Yeah.
Dana DuPerron: – I just can’t.
Jill Lewis: Yeah.
Dana DuPerron: So, how can you, what can we do? And a lot of times, we’re not talking to the employer at the beginning –
Jill Lewis: No.
Dana DuPerron: – when we’re on for the employer, right.
Jill Lewis: Yeah.
Dana DuPerron: – we’re behind the scenes, we’re like the ghost writers, people don’t always love lawyers –
Jill Lewis: Yeah, yeah.
Dana DuPerron: – believe it or not, yeah.
Jill Lewis: Yeah. That might be something you don’t want to send to your employer before you started working, is already a lawyer’s letter.
Dana DuPerron: Yeah. I mean, maybe sometimes, mostly not, but probably not.
Jill Lewis: Mostly not.
Dana DuPerron: Yeah.
Jill Lewis: Yeah. So no, we’ll send language, here’s how I would phrase it and –
Dana DuPerron: Yeah.
Jill Lewis: – you put your spin on it.
Dana DuPerron: Or even just a suggestion and ask that they revise, because I find employers usually like to have control over it, which I get.
Jill Lewis: Yeah.
Dana DuPerron: – acting for an employer, I would want to have control over it. And there’s some benefit too, because it’s not just on the employer’s end, someone comes and they’re negotiating something more favourable. OK, yes, that is what they’re doing, but both parties have a benefit there, because there’s certainty –
Jill Lewis: Yes.
Dana DuPerron: – right. You can have a contractual entitlement that might be less or different than what your common law entitlement would be, but you know what it is when your employment ends and the employer knows what it is.
Jill Lewis: Yeah.
Dana DuPerron: This is how much you’re going to get.
Jill Lewis: And for the employer, there are some arguments too at the end, if there’s a termination, and the employee tries to wiggle out of the clause –
Dana DuPerron: Right.
Jill Lewis: – tries to rely on Waxdale, there is a recent case about that, I’m not going to be able to reference it, I have no idea, we have to call Paul.
Dana DuPerron: Oh well.
Jill Lewis: And the fact that the employee negotiated it upfront with a lawyer –
Dana DuPerron: Yeah.
Jill Lewis: – was enough for the judge to say, no, you guys agreed, this is what it is. So, it can be, I think it’s in both party’s favours –
Dana DuPerron: Yeah.
Jill Lewis: – to negotiate these upfront and you’re going to save a ton of money, because then you’re not going to really deal with lawyers at the end.
Dana DuPerron: Yeah, you don’t need to fight over it at the end and you just have that certainty.
Jill Lewis: Yeah.
Dana DuPerron: You know going into it, what your rights are and what’s limited, so there’s no shock at the end either.
Jill Lewis: Yeah.
Dana DuPerron: And if you can live with it, even if you talk to someone at the beginning and you try to negotiate and the employer won’t negotiate, then you decide, do I take this anyway or, knowing what my risks are and hoping that my employment isn’t terminated. Or do I not leave my current employer for this new job –
Jill Lewis: Exactly.
Dana DuPerron: – if you’re in that position, if you’re not in that sort of fortunate position, where you have a current job –
Jill Lewis: yeah.
Dana DuPerron: – you might feel like you have to take it.
Jill Lewis: Yeah.
Dana DuPerron: And that might be a situation, where then you are looking for holes at the end of the relationship to try to get out of it, but you’ve still gone into it with your eyes open and you should always, if you’re signing something, assume it’s going to be enforceable.
Jill Lewis: Yeah, absolutely.
Dana DuPerron: Even if there are ways to get out of it, it’s better to think, OK, this is like worst case –
Jill Lewis: Yeah.
Dana DuPerron: – this is a likely outcome.
Jill Lewis: Yeah. And sometimes we’re seeing that with people who are already employed or your employer comes to you with a new contract, right.
Dana DuPerron: Yeah, yeah.
Jill Lewis: So, sometimes that could come up too where –
Dana DuPerron: Yeah.
Jill Lewis: – well we saw that quite a bit –
Dana DuPerron: Yeah.
Jill Lewis: – through COVID.
Dana DuPerron: Yeah.
Jill Lewis: Employers realised; I don’t really have contracts for all these people, so I’m going to offer them a bunch of contracts.
Dana DuPerron: Yeah.
Jill Lewis: And a lot of times, I’m not going to say, I’m not going to put HR in a bad position, because sometimes they don’t, they’re not really aware, they just –
Dana DuPerron: Yeah.
Jill Lewis: – they present it, we want to have everything in writing, we want to just tighten everything up. And so, employees just sign and sometimes, sorry, usually with –
Dana DuPerron: A termination clause.
Jill Lewis: – with a termination clause, but a signing bonus too, right.
Dana DuPerron: Oh yes, yes, yes.
Jill Lewis: So, here’s 250 bucks, sign the contract, because rush consideration, blah, blah, blah –
Dana DuPerron: Yeah, that 250 bucks or whatever they give you makes it enforceable.
Jill Lewis: Thank you, thank you.
Dana DuPerron: Yeah.
Jill Lewis: And that may have a termination clause too. So, anytime, I think you have to assume anytime you’re going to sign something that’s going to be enforceable, you should have a lawyer go –
Dana DuPerron: Yeah.
Jill Lewis: – take a look at it. And yeah, I mean that’s what I wish employees knew.
Dana DuPerron: Yeah. And employers.
Jill Lewis: And employers.
Dana DuPerron: And employers. So, come back next week.
Jill Lewis: Come back next week, we’re going to continue our exciting series of contracts 101.
Dana DuPerron: Post-employment obligations yeah. Thank you.
