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There are often circumstances where you look at a contract and it’s tempting to be confident as to how a court will decide a case.  For example, employees may be counselled, after a review of relevant documentation (including any employment contract) that the individual would receive more.

However, a recent Ontario case is an important reminder that you can almost never predict how a court will decide a case based on a review of the documentation alone.

What Happened?

The case (Raposo v. CA Canada Company) involved the termination of an employee who had worked as a Senior Business Technical Architect.  At the time of the termination of his employment he had worked for the company for just under 3 years.

His compensation included $150,000 plus commissions.  Following the termination of his employment, the company only provided him with the statutory minimums owing to him under the Ontario Employment Standards Act (the ESA).

The employee had signed an offer letter which provided that his entitlement on termination would be restricted to the minimums under the ESA.  He was also provided with a Corporate New Hire Paperwork which described his employment as “at will”, a concept unique to jurisdictions in the United States and inconsistent with employee rights in Canada.

The employee subsequently argued that the contract restricting his entitlements to the minimum under the ESA should not be found enforceable for reasons including that the contract was not clear and that there was no mention of entitlement to benefits and because he was given the Corporate New Hire Paperwork which described his employment as “at-will”.

The court, however, disagreed with the employee, holding that the contract was enforceable.  As a result, the court agreed with the employer that the employee was only entitled to statutory minimums.  In coming to this conclusion, the court held that the offer letter and accompanying confidentiality agreement together formed the terms of the contract.  The court also did not find the fact that the inclusion of benefits as a part of the termination pay was not explicitly mentioned as a reason to invalidate the termination clause.  Rather, the court held that the fact that the employment contract did not explicitly exclude the possibility of benefit continuation as sufficient to come to reasonably conclude that benefits would be included in termination pay.

The court also observed that the Corporate New Hire Paperwork was presented after the parties had already settled the terms of the employment relationship and that therefore it did not form part of the employment agreement.

Why is this important?

The case demonstrates that, while the language of a contract matters, courts will assess entitlements upon termination of employment on a case-by-case basis and decide the outcome ultimately on what they believe to have been the understanding as between the parties.  This means one cannot rely exclusively on the terms of a contract and that entitlements are determined through a comprehensive assessment of not just the language but also the underlying facts which formed the basis of the employment relationship.

For more information on this decision or any related matters, please feel free to contact Toronto Employment Counsel Sharaf Sultan at 416-214-5111 or by here.