- and - FRED DEELEY IMPORTS LTD. FACTUM OF THE PLAINTIFF/APPELLANT

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1 Court of Appeal File No.: C62132 COURT OF APPEAL FOR ONTARIO BETWEEN: JULIA WOOD - and - Plaintiff (Appellant) FRED DEELEY IMPORTS LTD. Defendant (Respondent) FACTUM OF THE PLAINTIFF/APPELLANT June 10, 2016 WHITTEN & LUBLIN PC 141 Adelaide St. West Suite 600 Toronto, ON M5H 3L5 Daniel A. Lublin LSUC # 51549F Marc W. Kitay LSUC #62896V Tel: (416) Fax: (416) dan@canadaemploymentlawyer.com SUPREME ADVOCACY LLP 340 Gilmour Street, Suite 100 Ottawa, ON K2P 0R3 Eugene Meehan, Q.C. LSUC#: 29046T Tel: (613) Fax: (613) emeehan@supremeadvocacy.ca Lawyers for the Plaintiff (Appellant)

2 -2- TO: WEIRFOULDS LLP Wellington St. West PO Box 35, Toronto-Dominion Centre Toronto, Ontario M5K 1B7 Abdul-Basit Khan LSUC #43098V Tel: (416) Fax: (416) Lawyers for the Defendant (Respondent)

3 TABLE OF CONTENTS PART I THE PARTIES AND THE ORDER... 1 PART II THE NATURE OF THE CASE AND THE ISSUES... 1 PART III THE FACTS... 3 Background... 3 Employment Agreement... 4 Motion Dismissed... 5 PART IV ISSUES AND THE LAW... 6 a. How must courts in Ontario address contractual language that is alleged to violate the ESA?... 6 The public policy considerations... 6 Conflicting Jurisprudence in Ontario when is a contractual clause inconsistent with the ESA?... 8 PAGE i. The Termination Clause in the Appellant s Contract is illegal and unenforceable Benefits and RRSP Contributions Severance Pay b. Can a contractual clause that is otherwise void or voidable be saved as a result of the conduct of the parties? c. The onus to demonstrate a contractual clause is unenforceable d. There was no consideration of the Appellant s Contract e. The award of 9 months pay in lieu of notice should be overturned PART V ORDER REQUESTED SCHEDULE A CASES CITED SCHEDULE B STATUTE EXCERPTS... 29

4 -1- PART I THE PARTIES AND THE ORDER 1. The Appellant, Julia Wood, brought a summary judgment motion heard February 25, Justice Dow declined to grant the Appellant s motion and dismissed the action. The Appellant appeals this decision. PART II THE NATURE OF THE CASE AND THE ISSUES 2. This is a test case that addresses an employer s ability to contract with employees in a manner that reduces, or in some instances eliminates, their common law severance rights. This case has implications for all non-union employees who are required to a sign an employment agreement, as most such agreements now contain clauses regarding termination. 3. In addition, this case is an opportunity for the Court of Appeal to address the broader issues of whether a party s conduct can save an otherwise unenforceable contractual clause and which party should bear the legal onus to support a contract that is under such a challenge. 4. The Appellant submits herein that the Respondent drafted and relied upon an employment contract that violates the terms of Ontario s Employment Standards Act, 2000 (the ESA ) and should not be enforced. The decision on appeal will make the difference between Ontarians receiving pay in lieu of reasonable notice of termination (i.e. a common law severance payment) instead of only the bare minimum amount of termination and severance pay provided by legislation. 5. In Machtinger v. HOJ Industries Ltd, 1 the Supreme Court of Canada established the modern law with respect to the interpretation of employment contracts. The Court set out that: employers must make contracts with their employees that, at least, comply with the minimum requirements of employment standards legislation; and 1 Machtinger v. HOJ Industries Ltd. [1992] 1 S.C.R. 986 (QL) ( Machtinger ) at paragraphs 19-36, Book of Authorities of the Appellant ( Appellant s BOA ) at Tab 1.

5 -2- any employment contract term that is contrary to employment standards legislation is illegal, and therefore, void. 6. In Machtinger, the Supreme Court was interested in creating a policy-based approach to interpreting employment contracts encouraging employers to comply with employment standards legislation upon termination and extending those protections to as many employees as possible. In order to do so, the Court confirmed that the principle of providing employees with reasonable notice of their terminations was a presumption, implied by law, which could only be displaced with clear and legal terms to the contrary. 7. The Supreme Court in Machtinger also called for a broad interpretation of Ontario s Employment Standards Act, 2000 (the ESA ) in a manner that would provide employers with an incentive to comply with the Act which is an approach (that) provides protection for employees in a manner that does not disproportionately burden employers The principles emanating from Machtinger have stood the test of time and are cited with approval in over 400 hundred cases at various levels across Canada. 9. The Ontario legislature has also expressly recognized the need to ensure compliance with the ESA by specifically prohibiting parties from agreeing to anything less than what the ESA provides. Section 5(1) of the ESA provides that any attempt to contract out of or waive an employment standard is void: No contracting out 5. (1) Subject to subsection (2), no employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void. 10. Despite the judgment in Machtinger and despite section 5(1) of the ESA, the principles established by the Supreme Court are not uniformly being applied, both in practice and in 2 Ibid. at paragraphs 34 and 35.

6 -3- decisions of lower courts. Conflicting decisions have led to significant uncertainty throughout Ontario with respect to the correct approach to interpreting termination language in employment contracts that are alleged to violate employment standards legislation. As a result of this uncertainty, in Ontario there are many unnecessary disputes and lawsuits and regrettably many instances where employees fundamental rights are not appropriately protected or preserved. 11. The Appellant urges this Honourable Court to take this opportunity to provide the necessary guidance to resolve the present uncertainty, so that both employers and employees can better understand their rights and obligations towards each other upon termination. PART III THE FACTS Background 12. The Appellant is a former employee of the Respondent. At the time of her termination, she was 49 years of age. 3 The Appellant was employed by the Respondent for approximately 8.3 years, from April 23, 2007 until August 4, The Appellant was employed as a Sales & Event Planner for the duration of her employment. She was terminated, without cause, along with a number of other employees, as a result of a corporate restructuring While employed, the Appellant received a base annual salary of $81,041.48, annual incentive bonus payments of up to 14% of her base salary, RRSP contributions of 9% of her salary ($7,196 in 2014), comprehensive health benefits (valued at $ per month), a clothing allowance, and 18 days vacation. In the two years prior to her termination, the 3 Plaintiff s Statement of Claim at paragraph 2, Appeal Book and Compendium of the Plaintiff/Appellant ( Appellant s Appeal Book ), Tab 4, Page Affidavit of Julia Wood sworn December 3, 2015 (the Wood Affidavit ) at paragraphs 5 and 28, Appellant s Appeal Book, Tab 6, Pages 27 and Wood Affidavit at paragraphs 6 and 27-28, Appellant s Appeal Book, Tab 6, Pages 27 and 32.

7 -4- Appellant earned $100, and $101, in total taxable income from employment. 6 The Appellant s RRSP contributions and portions of her benefits were a form of taxable income The RRSP contributions and health benefits provided to the Appellant were forms of remuneration, which along with her base annual salary, comprised her total annual compensation. 16. The Respondent s payroll size qualifies it as a severance-paying employer pursuant to the ESA. 8 Employment Agreement 17. The Appellant s evidence is that she was offered and accepted employment with the Respondent during a telephone call with the Respondent s National Sales Director, on or about April 17, The Appellant commenced employment on April 23, 2007 and states that on April 24, 2007 she met with the Respondent s human resources representative who gave her a written offer of employment (the Contract ), which she signed on that date It is undisputed that the Contract was prepared exclusively by the Respondent. 20. The Contract provided that the Respondent could terminate the Appellant at any time, without cause, as follows (the Termination Clause ): By providing you with 2 weeks notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the 6 Wood Affidavit at paragraphs 10, 11 and 17, Appellant s Appeal Book, Tab 6, Pages 28-29; and the Reasons for the Decision of the Honourable Justice Dow, released April 19, 2016 ( Reasons for Decision ) at paragraph 8, Appellant s Appeal Book, Tab 3, Page 8. 7 Wood Affidavit at paragraph 17, Appellant s Appeal Book, Tab 6, Page 29; and Wood Affidavit at Exhibit D, Exhibit Book of the Appellant ( Appellant s Exhibit Book ), Pages 20-22, Appellant s Appeal Book, Tab 7, Pages Wood Affidavit at Exhibit J, Appellant s Exhibit Book, Pages 71-77, Appellant s Appeal Book, Tab 8, Pages 40-46; and Statement of Defence at paragraph 16(a), Appellant s Appeal Book, Tab 5, Page Wood Affidavit at paragraph 21, Appellant s Appeal Book, Tab 6, Page Wood Affidavit at paragraph 23, Appellant s Appeal Book, Tab 6, Page 31.

8 -5- Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph, except for any amounts which may be due and remaining unpaid at the time of termination of your employment. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, Upon her termination without cause, the Respondent provided the Appellant with a severance package consistent with the Termination Clause in her Contract. It also offered the Appellant a payment in excess of the amounts set out in the Termination Clause, but only on the condition that she sign a release One of the items that were conditional upon the Appellant s execution of a release was a payment of $7,376, representing contributions towards the Appellant s RRSP entitlements for The Appellant did not execute the release and she was not provided with the payment towards her RRSP for The Appellant s health benefits were not continued beyond the date of termination. Motion Dismissed 24. Before Justice Dow, the Respondent argued that the Termination Clause complied with the ESA and governed all of the Appellant s entitlements upon her termination. The Appellant argued that the Termination Clause was unenforceable, as its language is contrary to the ESA and was signed without consideration. 25. Justice Dow dismissed the Appellant s Motion. 11 Wood Affidavit at paragraph 25, Appellant s Appeal Book, Tab 6, Page 31; and Wood Affidavit at Exhibit H, Appellant s Exhibit Book, Page 67, Appellant s Appeal Book, Tab 9, Page Wood Affidavit at paragraph 33, Appellant s Appeal Book, Tab 6, Page 32; and Wood Affidavit at Exhibit J, Appellant s Exhibit Book, Pages 71-77, Appellant s Appeal Book, Tab 8, Pages Affidavit of Buzz Green, sworn February 11, 2016 (the Green Affidavit ) at paragraph 43, Appellant s Appeal Book, Tab 10, Page 55; also see Wood Affidavit at paragraphs 33 and 36, Appellant s Appeal Book, Tab 6, Pages Wood Affidavit at paragraph 36, Appellant s Appeal Book, Tab 6, Page 33; and Green Affidavit at paragraph 46, Appellant s Appeal Book, Tab 10, Page 55.

9 -6- PART IV ISSUES AND THE LAW 26. The Appellant states that the issues on this appeal are as follows: a. How must courts address contractual language that is alleged to violate the ESA? i. Why the Termination Clause in the Appellant s Contract violates the ESA. b. Can a contract or contractual clause that is otherwise void be saved as a result of the conduct of a party? c. Which party has the onus to demonstrate that a contractual term is unenforceable? d. Are contracts of the type herein unenforceable because there is no consideration? e. Did Justice Dow err in fact and or law in his assessment of damages? a. How must courts in Ontario address contractual language that is alleged to violate the ESA? The public policy considerations 27. In Machtinger, 15 the Supreme Court confirmed that an employee s right to reasonable notice of termination is a fundamental right which should not be displaced lightly or without clear language to the contrary. Therefore, this is a right that our courts should strive to protect unless it is clearly and properly ousted. 28. Five years later, in Wallace v. United Grain Growers Ltd., 16 the Supreme Court of Canada emphasized the uniqueness of employment contracts, as opposed to ordinary commercial agreements, stating that employees are rarely able to negotiate contracts on equal footing with their employers and that the employment relationship is a special one that sets it apart from ordinary commercial exchanges. 29. In Wallace, the Supreme Court also confirmed that employees are a vulnerable group and that this vulnerability is most apparent at the time of termination, when employees are most 15 Supra note Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 (QL) ( Wallace ), Appellants BOA at Tab 2.

10 -7- in need of protection. Therefore, the law ought to discourage conduct that minimizes economic damages flowing from dismissal A general approach to the interpretation of employment contracts in a manner that prefers the protection of employees at the time of termination was specifically adopted by the Ontario Court of Appeal in Ceccol v. Ontario Gymnastic Federation. 18 In that case, the Court was asked to interpret a termination clause with two possible interpretations, one which would preserve an employee s right to reasonable notice of her termination and one which would limit her to only the minimum statutory payments found in the ESA. The Court of Appeal confirmed that policy considerations in workplace law dictate that courts should favour an approach that preserves reasonable notice of termination: In the present appeal, there are, as I have tried to demonstrate, two plausible interpretations of article 5.4 of the employment contract. One interpretation would remove the common law entitlement to reasonable notice; the other would preserve it. One interpretation would result in a termination provision which the trial judge described as "especially stringent and onerous"; the other would provide an employee with notice which at common law, both parties accept, is reasonable. One interpretation would provide a loyal and professional 16-year senior employee with $7,700 in termination pay; the other would provide her with $66,700. In my view, in each instance the second interpretation is preferable. It is also, in my view, consistent with the leading decisions of the Supreme Court of Canada in the employment law domain In Christensen v. Family Counselling Centre of Sault Ste. Marie and District, 20 the Ontario Court of Appeal also considered the effect of a termination clause that provided for various interpretations, some that produced a lawful result and some that produced a result that was contrary to the ESA. In striking down the termination clause for not clearly limiting 17 Ibid. at paragraphs Ceccol v. Ontario Gymnastic Federation, [2001] O.J. No (QL) (C.A.) ( Ceccol ), Appellant s BOA at Tab Ibid at paragraphs [Emphasis added]. 20 Christensen v. Family Counselling Centre of Sault Ste. Marie and District, [2001] O.J. No (QL) (C.A.) ( Christensen ), Appellant s BOA at Tab 4.

11 -8- reasonable notice, the Court of Appeal commented on the test for upholding termination language, citing with approval the language of the trial judge: If the Defendant wished to limit its obligations on termination of employment to the notice provisions provided by section 57 of the Employment Standards Act, it should have clearly expressed those intentions and brought them home to the prospective employee. 32. The guidance provided by these seminal decisions is that courts must be vigilant to ensure that employment contracts, and particularly clauses that seek to limit or eliminate reasonable notice of termination, should be interpreted in a manner that protects employees and preserves this fundamental right. Any attempt to create a contractual clause that displaces this right must be carefully scrutinized and narrowly construed. Conflicting Jurisprudence in Ontario when is a contractual clause inconsistent with the ESA? 33. Despite clear Court of Appeal and Supreme Court decisions, there continues to be an ongoing debate within Ontario with respect to when termination language in an employment contract will run afoul of the ESA. As stated above, section 5(1) of the ESA mandates that any attempt to waive or contract out of an employment standard is void. This is the main challenge advanced by the Appellant with respect to her own Contract.

12 -9- Machtinger v. HOJ Industries Ltd A termination clause that fails to comply with minimum standards contained in employment standards legislation is not enforceable. Inconsistent Jurisprudence Wright v. Young and Rubicam Group of Companies (Wunderman) 21 : the fact that employer continued the employee s benefits did not change the meaning of the language used in the agreement and, as the language violated the ESA, the clause as struck down. Stevens v. Sifton Properties Ltd. 23 : the Court considered and applied Stevens the failing of the termination provisions was that they attempted to draw the circle of employee rights and entitlements on termination with an all-encompassing specificity that resulted in the effective and impermissible exclusion and denial of the benefit continuation rights mandated by the legislation. Garreton v Complete Innovations Inc. 25 : the employment contract must be considered at the time it is executed; if the termination provision is not onside with notice provisions and severance provisions of the Act at the outset, then it is void and unenforceable. John A. Ford & Associates Inc. (c.o.b. Training Services) v. Keegan 22 : a contractual termination provision need only satisfy the employee s ESA entitlement at the actual time of termination. Goldsmith v. Sears Canada Inc.24: rejection of arguments in Wright; adoption of reasoning in Keegan. Roden v. Toronto Humane Society 26 : the Ontario Court of Appeal upheld an employer s right to limit an employee s termination pay through contractual language that references the applicable employment standard legislation, even though this clause did not expressly include the employee s entitlement to benefits. 21 Wright v. Young and Rubicam Group of Companies (Wunderman), 2011 ONSC 4720 (QL) (S.C.J.) ( Wright ), Appellant s BOA at Tab John A. Ford & Associates Inc. (c.o.b. Training Services) v. Keegan, 2014 ONSC 4989 (QL) (S.C.J.) ( Keegan ), Appellant s BOA at Tab Stevens v. Sifton Properties Ltd., 2012 ONSC 5508 (QL) (S.C.J) ( Stevens ), Appellant s BOA at Tab Goldsmith v. Sears Canada Inc., 2015 ONSC 3214 (QL) (S.C.J.), Appellant s BOA at Tab Garreton v Complete Innovations Inc., 2016 ONSC 1178 (QL) (Div. Ct.) ( Garreton ), Appellant s BOA at Tab Roden v. Toronto Humane Society, [2005] O.J. No (QL) (C.A.), Appellant s BOA at Tab 10.

13 -10- Miller v. A.B.M. Canada Inc. 27 : the termination clause was determined unenforceable as it fell below legislated minimums. Paquette v. Quadraspec Inc. 28 : application of principles in Miller. Carpenter v Brains II, Canada Inc. 29 : application of principles in Miller. 34. The starting point is the Supreme Court s decision in Matchinger, 30 : a contract clause that fails to comply with minimum statutory requirements must be set aside; and employees should not be placed in a worse position than if a contract had said nothing at all about notice of termination. 35. Applying Matchinger, there should be no question that non-compliance with the ESA will render a contractual clause void. 36. In Wright v. Young and Rubicam Group, 31 Justice Low struck down a termination provision in an employment contract on the basis that (a) it did not provide for benefit continuation during the minimum notice period for termination required by the ESA; and (b) while it complied with the ESA at the time of the Plaintiff s termination, it would was not compliant with the ESA at a future point in time. Justice Low held that there should be no particular difficulty in fashioning a termination clause that does not violate either the minimum standards imposed by the ESA and no compelling reason to uphold a 27 Miller v. A.B.M. Canada Inc., 2014 ONSC 4062 (QL) (S.C.J.) ( Miller ), Appellant s BOA at Tab Paquette v. Quadraspec Inc., 2014 ONSC 2431 (QL) (S.C.J.), Appellant s BOA at Tab Carpenter v Brains II, Canada Inc., 2015 ONSC 6224 (QL) (S.C.J.), Appellant s BOA at Tab Supra note 1, at paragraphs 34 and Supra note 21.

14 -11- termination clause which the draftsman may reasonably be understood to have known was not enforceable either at all or under certain circumstances In Stevens v. Sifton Properties Ltd., 33 Justice Leach followed the decision in Wright, and also held that a termination provision that did not provide for the continuation of benefits during the ESA s minimum notice period for termination, was void and unenforceable. 38. However, the opposite conclusion was reached in Ford v. Keegan. 34 Disagreeing with the findings of Justice Low in Wright, Justice Price held that a contract need not comply with the ESA at every point in time as this restricts to an unreasonable extent the parties right to negotiation (sic) their own agreement. The reasoning in Keegan was followed in Goldsmith v Sears Canada Inc., 35 and in Oudin v. Le Centre Francophone de Toronto The Keegan decision was rejected by the Ontario Divisional Court in Garreton v. Complete Innovations Inc., 37 The Court found that any potential violation of the ESA must render a termination clause unenforceable. 40. In Miller v. A.B.M. Canada Inc., 38 Justice Glithero concluded that the termination clause was inconsistent with the ESA and must be struck down because it failed to provide pension contributions and car allowance payments, which the employee received while employed, during the minimum notice period for termination provided by the ESA. The Divisional Court upheld this finding on appeal, 39 again referring to the policy considerations outlined by the Court of Appeal in Ceccol. 32 Ibid. at paragraph Supra note 23 at paragraphs Supra note 22 at paragraphs Supra note 24 at paragraphs Oudin v. Le Centre Francophone de Toronto, 2015 ONSC 6494 (QL) (S.C.J.) at paragraphs 35-45, Appellant s BOA at Tab Supra note 25 at paragraphs Supra note 27 at paragraphs Miller v A.B.M. Canada Inc., 2015 ONSC 1566 (Div. Ct.), Appellant s BOA at Tab 15.

15 In Paquette v. Quadraspec Inc. 40 and Carpenter v Brains II, Canada Inc., 41 the courts reached the same findings as in Miller, regarding the exclusion of benefits during the minimum notice period for termination prescribed by the ESA. 42. The decision of the Court of Appeal in Roden v. The Toronto Humane Society, 42 (which was relied upon by Justice Dow when refusing to render the Appellant s Contract unenforceable) stands in contrast to the decisions in Miller, Quadraspec and Carpenter. 43. In Roden, the Court of Appeal found that language in a termination clause that is silent with respect to benefits continuation during minimum statutory notice period was acceptable, as this referentially incorporated the provisions of the ESA. The implication from this finding is that termination language in employment contracts need not always ensure compliance with the ESA, and that lower courts may have the latitude to read in or infer compliance in instances where it is in dispute. 44. It is now the appropriate time for this Honourable Court to reconsider its earlier findings in Roden, having regard to the developments in the jurisprudence since the decision was released in 2005, as well as, the ambiguity created by the finding that a court can infer compliance with the ESA, where a clause is silent in important respects. i. The Termination Clause in the Appellant s Contract is illegal and unenforceable Benefits and RRSP Contributions 45. The language in issue states that the Respondent could terminate the Appellant as follows: By providing you with 2 weeks notice of termination or pay in lieu thereof for each completed or partial year of employment with the Company. If the Company terminates your employment without cause, the Company shall not be obliged to make any payments to you other than those provided for in this paragraph, except for any amounts which may be due and remaining unpaid at the time of termination of 40 Supra note 28 at paragraphs Supra note 29 at paragraph Supra note 26 at paragraphs

16 -13- your employment. The payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, (Emphasis added) 46. This language is inconsistent with the ESA in several fundamental ways: As outlined in Wright, Stevens, Miller, Quadraspec and Carpenter, the ESA requires that employers do not reduce or alter any term of employment during a termination notice period and, if pay in lieu of notice is provided, to ensure that the employee receives a payment equal to the amount the employee would have received had proper notice been provided, along with continued benefit contributions; The relevant portions of Sections 60 and 61 of the ESA states as follows: Requirements during notice period 60. (1) During a notice period under section 57 or 58, the employer, (a) shall not reduce the employee s wage rate or alter any other term or condition of employment; (b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week; and (c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee s benefits under the plan until the end of the notice period. Pay instead of notice 61. (1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer, (a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and (b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive. 44 In Wright, Stevens, Miller, Quadraspec and Carpenter, the courts found that the ESA requires the continuation of benefits where pay in lieu of notice termination is provided; 43 Wood Affidavit at Exhibit H, Appellant s Exhibit Book, Page 67, Appellant s Appeal Book, Tab 9, Page Employment Standards Act, 2000, S.O. 2000, c. 41 ( ESA ), at ss

17 -14- In Wright, the Court equated RRSP contributions, car allowance payments and a parking allowance as a form of benefits ; 45 In both Stevens and Miller, the courts specifically found that the exclusion of pension contributions during the statutory notice period was contrary to the ESA In this case, the Appellant received health benefits and RRSP contributions while employed with the Respondent. Justice Dow found at paragraph 8 of the Reasons for Decision that the Appellant was entitled to a matching RRSP contribution of up to nine percent of her base salary which amounted to $7,196 in 2014, and a benefits plan, valued at $ per month at the time of termination The Appellant submits that her RRSP contributions were a term of her employment which could not be reduced or altered during a termination notice period under the ESA, or where pay in lieu of notice is provided, this is a benefit which must be continued and not cut off. 49. The Appellant s Termination Clause states that she would only receive 2 weeks notice or pay in lieu of notice, inclusive of her entitlements under the ESA: this language should not be construed as permitting the continuation of benefits, RRSP contributions or any other form of perquisite, or payment in lieu thereof. 50. Upon the Appellant s termination, her entitlement to her 2015 RRSP payment was withheld from her unless she signed a release, 48 demonstrating that the Respondent did not even treat the Termination Clause as ever requiring it to provide this benefit to the Appellant. 51. The illegality of the Termination Clause is further illustrated by its language stating that 2 weeks notice or pay in lieu thereof is inclusive of the Appellant s entitlements under the 45 Supra note 21 at paragraphs 8 and Supra note 23 at paragraph 53; and supra note 39 at paragraph Reasons for Decision at paragraph 8, Appellant s Appeal Book, Tab 3, Page Green Affidavit at paragraphs 43 and 46, Appellant s Appeal Book, Tab 10, Page 55; and Wood Affidavit at paragraphs 33 and 36, Appellant s Appeal Book, Tab 6, Pages

18 -15- ESA. This language expressly excludes any benefits or other forms of compensation from being referentially incorporated by the ESA, as the Court of Appeal found was possible in Roden. 52. The Appellant submits that the Termination Clause is very different from the type of language that the Court of Appeal found was capable of compliance with the ESA in Roden. Justice Dow erred in law in failing to make this distinction. Severance Pay 53. The Termination Clause also excludes the Appellant s statutory severance payments that are required by virtue of section 64 of the ESA. 54. The Respondent held an unconditional obligation to provide severance pay to the Appellant upon her termination, due to her tenure and its payroll size. In fact, the letter of termination authored by the Respondent states: Deeley will provide you with a lump sum payment in the amount of $13,778 in respect of 8 weeks compensation in respect of your entitlement to statutory severance pay under the ESA Despite its requirement to provide severance pay, the Termination Clause only requires the Respondent to provide 2 weeks notice of termination or pay in lieu thereof which was meant to be inclusive of your entitlements to notice, pay in lieu of notice and severance pay pursuant to the Employment Standards Act, 2000 (emphasis added). This language should not be read as inferring that the Respondent intended to referentially incorporate severance pay. The language specifically excludes it. 56. Notice of termination and severance pay are separate and distinct requirements of the ESA. This was explained by the Divisional Court in Garreton in finding that a clause that only provided for notice excluded the requirement to provide severance pay: 49 See Wood Affidavit at Exhibit J, Appellant s Exhibit Book, Pages 71-77, Appellant s Appeal Book, Tab 8, Pages 40-46; and Statement of Defence at paragraph 16(a), Appellant s Appeal Book, Tab 5, Page 22.

19 -16- Sections 64 and 65 of the Act provide that where an employee has 5 or more years employment and the company has a payroll of $2.5 million or more, the employee is entitled to effectively a further week for each year of employment for severance pay over and above termination pay. CI has a payroll of more than $2.5 million. Clearly therefore, the termination provision, which limits pay in lieu of notice to 8 weeks maximum and the above provision which includes severance pay in the notice are contrary to the Act in that they limit an employee who is terminated and entitled to severance pay to less than he or she is entitled to under the Act The Appellant worked for the Respondent for approximately 8.3 years and she was entitled to 8 weeks notice of termination and 8.3 weeks severance pay in accordance with the ESA. With respect to Justice Dow, he failed to appreciate the Appellant was entitled to severance pay at the time of her termination and that severance pay was excluded from the Termination Clause. At paragraph 17 of his decision, he wrote: However, as argued by the defendant, its termination clause not only provided payment in accordance with the Employment Standards Act, 2000, S.O. 2000, c.41 but, on the basis of two weeks per year of service payment is in excess of that legislation which, at section 57, limits recovery to eight weeks if the period of employment is eight years of more. (Emphasis added). 58. The severance pay provisions of the ESA are found at sections of the Act and the reference to this issue is absent from Justice Dow s decision 59. Further, it is submitted that, even if the Appellant were not entitled to severance pay under the ESA at the time of her termination, the mere possibility of this entitlement would be sufficient to render the Termination Clause inconsistent with the ESA, in the manner outlined in Wright. 60. Finally, the standard of review with respect to whether the Termination Clause is contrary to the ESA is assessed on the correctness standard. This was addressed by the Divisional Court in Miller: 50 Supra note 25 at paragraph 22.

20 -17- We agree that the question of the application of the Roden decision to the contract with which we are concerned is a matter to be reviewed on the correctness standard. 51 b. Can a contractual clause that is otherwise void or voidable be saved as a result of the conduct of the parties? 61. This appeal also raises the broader question of whether or not a party can remedy unenforceable language in a contract as a result of their conduct. Put another way, can a party s actions or gratuitous payments cure the consequences of poorly drafted, ambiguous, illegal or otherwise unenforceable contractual language? 62. This issue is particularly relevant to termination language in employment contracts, as employers commonly provide employees with gratuitous or without prejudice payments and terms upon a termination, in addition to whatever payments and terms are required pursuant to their contracts. In cases where a termination clause does not provide for continuation of benefits during a statutory notice period, is a party entitled to remedy this deficiency by virtue of its conduct, and will doing so, bring an otherwise unenforceable language back onside with legislation? 63. Here, the Respondent was aware that it was required to provide severance pay to the Appellant in accordance with the ESA and, in fact, it did so on an unconditional basis. However, the Termination Clause did not call for this payment and in fact excluded it. Should the Respondent s extra-contractual compliance with the ESA save the unenforceable aspect of its Termination Clause? The Appellant says it should not. 64. Also, in this case, the Respondent provided the Appellant with the continuation of her benefits during her statutory notice period, which was provided as working notice. However, the Termination Clause only called for the provision of notice or pay in lieu of notice and not benefits. Had the Respondent provided the Appellant with pay in lieu of 51 Supra note 39 at paragraph 19.

21 -18- notice, instead of working notice, the continuation of any benefits, including RRSP contributions, would be outside of the scope of the Termination Clause. 65. Justice Dow resolved this issue by effectively finding that the conduct of the Respondent complied with the ESA, so no violation was present. He stated: However, there is no evidence that the defendant did not continue to make the requisite premium payments on behalf of the Plaintiff. For example, there is no evidence that the Plaintiff submitted a claim during her working notice which was rejected on the basis she no longer had coverage This reasoning is problematic and should be expressly rejected. If an employer can remedy an unenforceable clause by virtue of its conduct, then it is provided with little incentive to draft an enforceable clause to begin with. 67. This issue was addressed to a degree in Machtinger, where the Supreme Court was asked to find that an unenforceable clause could still be used as evidence of the intentions of the parties when entering into the contract. In rejecting this proposition the Court stated: I find nothing in the evidence in the present case to warrant the conclusion that the parties, had they turned their minds to the subject, would have agreed to substitute for the void contractual term the minimum period of notice required by statute instead of looking to the common law standard of reasonable notice Further, with respect to policy considerations in the workplace context, the Supreme Court also stated: If the only sanction which employers potentially face for failure to comply with the minimum notice periods prescribed by the Act is an order that they minimally comply with the Act, employers will have little incentive to make contracts with their employees that comply with the Act. As Swinton and Etherington suggest, most individual employees are unaware of their legal rights, or unwilling or unable to go to the trouble and expense of having them vindicated. Employers can rely on the fact that many employees will not challenge contractual notice provisions which are in fact contrary to employment standards legislation. Employers such as the 52 Reasons for Decision at paragraph 15, Appellant s Appeal Book at Tab 3, Page Supra note 1 at paragraph 29.

22 -19- present respondent can contract with their employees for notice periods below the statutory minimum, knowing that only those individual employees who take legal action after they are dismissed will in fact receive the protection of the minimum statutory notice provisions. In my view, an approach more consistent with the objects of the Act is that, if 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. Employers will have an incentive to comply with the Act to avoid the potentially longer notice periods required by the common law, and in consequence more employees are likely to receive the benefit of the minimum notice requirements It should also be noted that in both Wright and Stevens, the Court found that the defendantemployer s continuation of benefits for the period required by the ESA did not operate to cure the alleged violation of the Act: In particular, employers should be provided with incentive to ensure that their employment contracts comply with all aspects of the employment standards legislation, including provision of adequate notice (or pay in lieu thereof) and mandated benefit continuation. As emphasized by Justice Low in Wright, supra, an employer s voluntary provision of additional benefits after the fact does not alter the reality that the employment contract drafted by the employer is contrary to law Justice Dow made an error of law when finding that the lack of evidence that the Appellant suffered damages by not having benefits was sufficient to render the clause compliant with the ESA. 71. Further, this Honourable Court may now take this opportunity to provide necessary guidance by reaffirming that illegal or unenforceable contractual language should not be cured by virtue of any gratuitous or without prejudice conduct of the parties. 54 Ibid. at paragraphs [Emphasis added]. 55 Stevens, supra note 23 at paragraph 65. [Emphasis added].

23 -20- c. The onus to demonstrate a contractual clause is unenforceable 72. This appeal provides the opportunity for this Honourable Court to provide required guidance with respect to the issue of the onus to render a contractual clause illegal or unenforceable. This is an issue that was extensively argued before Justice Dow, although it is not addressed in the Reasons for Decision. 73. The Appellant acknowledges that ordinarily it is the onus of the moving party or plaintiff to meet its case. However, given the policy considerations outlined herein, this Honourable Court should find that a reverse onus applies with respect to impugned termination language in an employment contract that purports to reduce or eliminate the fundamental right to reasonable notice of termination. 74. In Machtinger, Justice Iacobucci stated: I would characterize the common law principle of termination only on reasonable notice as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly. 56 (Emphasis added). 75. The onus to demonstrate that an employment contract clearly displaces the right to reasonable notice of termination must fall on the party who drafts the contractual language and receives the benefits of its terms. Given the implied right to reasonable notice of termination is a fundamental right, this burden should not be a light one. 76. Consistent with the policy considerations espoused by the Supreme Court in Machtinger and the Court of Appeal in Ceccol, placing the burden of demonstrating that a contractual termination clause is enforceable, on the party who receives the benefit of that clause, should operate as an incentive for that party to draft its contract in a proper and lawful manner, which extends the protections of the ESA as far as possible. Further, as stated by Justice Low in Wright, there should be no particular difficulty in fashioning a termination clause that does not violate either the minimum standards imposed by the Employment 56 Supra note 1 at paragraph 20.

24 -21- Standards Act. 57 The Appellant is unaware of any case where this particular issue is specifically addressed and submits that a strong and clear ruling on this point will serve to notify the lower courts and legal profession of the type of scrutiny that will be applied to a contractual clause that attempts to limit employees fundamental right to reasonable notice of termination. 77. In the present case, if such a precedent were before Justice Dow, it is more likely a correct and just result would have occurred. d. There was no consideration for the Appellant s Contract 78. Justice Dow incorrectly found that that there was consideration for the Contract as he either applied the incorrect legal test or made inferences of fact not properly founded in the evidentiary record. 79. The Appellant s evidence is that she received a copy of the Contract after she started work. There is no actual evidence that she received it before. The Contract is signed on April 24, 2007 and the parties agree that the Appellant commenced employment on April 23, It is clear that fresh consideration is required for a written employment contract that is provided to an employee following the commencement of work, as this contract will vary the oral or implied employment agreement that exists by virtue of the common law. This issue was recently revisited and conclusively resolved by this Honourable Court in Holland v. Hostopia.com Inc There is no evidence of fresh consideration provided to the Appellant in this case. Rather, the issue is whether or not the Appellant received the Contract prior to her employment. On this point, there was simply no conclusive evidence presented by either party. The Appellant affirmed that she received an oral offer of employment, which was accepted on 57 Supra note 21 at paragraph Holland v. Hostopia.com Inc., 2015 ONCA 762 (QL) ( Holland ), Appellant s BOA at Tab 16.

25 -22- April 17, 2007 and that it was sometime thereafter that she received a written offer of employment. The Appellant then states that she was provided with the Contract when she started work The Respondent adopted part of the Appellant s evidence but attempted to add that it would have been its standard practice in 2007 to deliver an offer letter to a candidate via approximately one week prior to a hiring. 60 To this end, the Respondent was unable to produce a copy of this alleged and its testimony on this allegedly standard practice was rightly rejected by Justice Dow as hearsay. Further, the Respondent was unable to produce any evidence, from any witness, to confirm when the Contract was actually given to the Appellant prior to her employment. The only tangible evidence is the Contract itself, which was signed a day following the Appellant s commencement date, and is dated with the wrong year. 83. Justice Dow inferred the Contract was received by the Appellant prior to starting work because it includes a commencement date for employment and the other usual requisite details of the Plaintiff s employment which would have been the subject of the telephone conversation There are many plausible explanations for why the Contract would contain a commencement date and the usual details of the Appellant s employment. These are the most common terms that are set out in an employment agreement. Justice Dow made incorrect or unreasonable findings of fact and drew inferences not properly supported by the facts, in reaching this decision. 85. Furthermore, in an instance where the Contract is being relied upon by the Respondent to reduce or eliminate her fundamental common law right to reasonable notice of termination, 59 Wood Affidavit at paragraphs 21-24, Appellant s Appeal Book, Tab 6, Pages Green Affidavit at paragraphs 11-24, Appellant s Appeal Book, Tab 6, Pages Reasons for Decision at paragraphs 4-6, Appellant s Appeal Book, Tab 3, Page 8.

26 -23- the Respondent should have held the legal onus to demonstrate that the Contract was entered into with proper legal consideration. The Respondent s evidence on this point was lacking or was inadmissible as hearsay evidence. 86. If Justice Dow approached the challenge to the Contract on the basis that it was the Respondent s burden to demonstrate that the Contract it relies upon was properly and lawfully implemented, the result would have differed give the Respondent s lack of evidence on this point. 87. If the onus to prove that consideration was provided falls squarely upon the Respondent, this Honourable Appeal Court can come to the finding that there was no consideration for the contract. 88. The issue of contract formation is one that is reviewable by this Honourable Court on the basis of the standard of correctness on the issue of law and the standard of palpable and overriding error on the issue of fact. 62 The legal issue of which party bears the onus is one of law. e. The award of 9 months pay in lieu of notice should be overturned 89. This Honourable Court commented on the correct standard of review for assessments of a reasonable notice period in Love v. Acuity Investment Management Inc, 63 stating that the notice period awarded by a trial judge is entitled to deference, unless there is an error of principle, in which case an appeal court can intervene, although sparingly. 90. As outlined below, Justice Dow erred in principle when he failed to properly apply the law to the facts that were before him. In particular, he failed to recognize and address that the Appellant s character of employment and unusually high compensation left her in a more 62 Holland, supra note 58 at paragraph Love v. Acuity Investment Management Inc., 2011 ONCA 130 (QL) ( Love ), Appellant s BOA at Tab 17.

27 -24- difficult position to find other work. To this end, Justice Dow overemphasized several cases, which were distinguishable in an important respect. 91. In her evidence, the Appellant identified several issues that were affecting her ability to find comparable work including: her age and competing against a younger candidate pool; having to learn modern methods for securing employment compared to the different job search paradigm in effect when she last looked for work; the limited number of reasonable job opportunities suited to her skills, experience and training; and the fact that job opportunities that were suited to her skills and training were sometimes paying substantially less than what she received The above factors are all related to the availability of similar employment, having regard to the experience, training and qualifications of the servant set out in Bardal v. The Globe & Mail Ltd In an attempt to find other work following her termination, the Appellant applied to 65 positions over a 9 month period and received job interviews in only 6 cases, which did not result in reemployment. Her reemployment efforts were well documented. 66 The Appellant submits that this is compelling evidence of the unavailability of similar employment and ought to have been taken into the account by Justice Dow when setting the notice period. 94. Justice Dow appears to have put little emphasis on this important element of the Bardal test, and rather focussed almost entirely on the examples submitted to him by the 64 Wood Affidavit at paragraph 38, Appellant s Appeal Book, Tab 6, Page Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140, [1960] O.J. No. 149 (QL) (H. Ct.) at paragraph 21, Appellant s BOA at Tab 18; Love, supra note 63 at paragraph Supplementary Affidavit of Julia Wood, Sworn February 17, 2016 (the Supplementary Wood Affidavit ), Appellant s Appeal Book, Tab 11, Pages 56-57; and the Supplementary Wood Affidavit at Exhibit A, Appellant s Exhibit Book, Pages , Appellant s Appeal Book, Tab 12, Pages