Howard Levitt: A tough lesson for a $185,000-a-year executive who had her employment contract vetted by a lawyer – Financial Post

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Case may create basis of a negligence case against a lawyer if they have a client sign off on an unenforceable contract
By Howard Levitt and Puneet Tiwari
A little over a year ago we wrote about an Ontario Court of Appeal decision that reshaped employment law, much to the chagrin of employers everywhere. Waksdale v. Swegon North America Inc. continues to wreak costly havoc for employers while teaching the expensive lesson of having sound and enforceable termination clauses in place.
The Ontario Court of Appeal held in Waksdale that if any part of a termination provision in an employment contract breached the Employment Standards Act, the entire provision was unenforceable, and the employee would recover full, wrongful dismissal damages. That’s a lot more money than what the employer believed it had contractually bargained for. This is notwithstanding the employee and employer entering into that contract knowingly and willingly.

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A new decision in the Ontario Superior Court of Justice, Rahman v. Cannon Design Architecture Inc., has now distinguished the Waksdale decision, creating some solace for employers but uncertainty for everyone.
Farah Rahman, the 61-year-old employee, agreed to an employment contract paying her $185,000 per year, plus benefits and bonus. An important factor is that the employee engaged a lawyer to negotiate her contract.
The contract contained a “just cause” provision whereby Rahman would receive nothing if she was fired for ‘cause’ even if it did not rise to the level of wilful misconduct. This is not as strict a standard as required by the Employment Standards Act and, as result, the Waksdale decision would have operated to make the dismissal without cause section of the contract unenforceable as well.
Unlike in Waksdale, Justice Sean Dunphy declared the termination without cause provision enforceable. He went further to say that Rahman had the benefit of a lawyer to negotiate her contract. She was a sophisticated party earning over $185,000 a year; both parties had equal bargaining power and both parties intended to comply with the minimum standards of the Employment Standards Act.
Employers and employees should both learn from this:
It is important for all parties to consider that context can be as important as the contract itself. Having a lawyer review all contracts, whether an employer or employee, despite this anomaly, is still prudent.
Got a question about employment law during COVID-19? Write to Howard at levitt@levittllp.com.
Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada. Puneet Tiwari is with Levitt Sheikh.
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