In Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), the Supreme Court of Canada held that a termination clause that provides less than the applicable minimum notice period prescribed by the Employment Standards Act is unenforceable.
Background
Despite Mr. Machtinger having been employed for more than five years, his employment contract provided that he could be terminated without any notice at all.
The applicable employment standards legislation in Ontario at the time, however, required that employees with between five and ten years of service must be provided with at least four weeks’ notice, or pay in lieu of notice, of dismissal. Further, the legislation stated that any agreement to contract for less than the minimum employment standards would be null and void:
[N]o employer, employee, employers’ organization or employees’ organization shall contract out of or waive an employment standard, and any such contracting out or waiver is null and void.
In 1985, Mr. Machtinger was dismissed and provided with four weeks of severance, more than what his contract required and equal to his minimum Employment Standards Act entitlement, but less than what he would be owed at common law.
But for the Employment Standards Act, Mr. Machtinger would not have been entitled to any notice or severance at all. The presumption at common law that an employee is entitled to reasonable notice of dismissal can be rebutted by clear language in a contract specifying a shorter notice period. The termination clause in Mr. Machtinger’s employment contract clearly rebutted the presumption of reasonable notice. And the four weeks of severance that he received complied with the Employment Standards Act minimum requirements. Mr. Machtinger would only be entitled to a further amount if he could be owed reasonable notice.
Issue
If an employment contract sets out a notice period that is shorter than the minimum period set out in the applicable employment standards legislation, is the employee entitled to reasonable notice or only the minimum notice required under the legislation?
Decision
A termination clause that provides less than an employee’s statutory minimum entitlement is rendered null and void.
Because Mr. Machtinger’s contract would provide him with less than the minimum notice period specified in the Employment Standards Act, his termination clause was automatically rendered “null and void” for all purposes. As a result, the Court held that the termination clause was of no effect in determining the appropriate notice period, and the presumption of reasonable notice was not rebutted:
[I]f an employment contract fails to comply with the minimum statutory notice provisions of the Act, then the presumption of reasonable notice will not have been rebutted.
Note: Although Machtinger was decided with reference to Ontario’s former Employment Standards Act, the decision applies equally to employees covered by section 63 of British Columbia’s Employment Standards Act (although the exact length of the minimum notice periods differ). This is because section 4 of BC’s Act similarly states that attempts to contract out of the Employment Standards Act are not permitted:
The requirements of this Act and the regulations are minimum requirements and an agreement to waive any of those requirements, not being an agreement referred to in section 3 (2), has no effect.