Enforceability of Termination Clauses for Federally-Regulated Employees

  • January 05, 2021
  • Gregory Ko, Kastner Lam LLP

The Superior Court of Ontario’s decision in Sager v. TFI International Inc., 2020 ONSC 6608, offers helpful clarity on the enforceability of termination clauses for employment relationships governed by the Canada Labour Code (the “CLC”).

While the courts have had ample opportunities to examine termination clauses for illegality against the Employment Standards Act, 2000 (the “ESA”) – most notably in the Ontario Court of Appeal’s decision in Wood v. Fred Deeley Imports Ltd. (“Fred Deeley”) – few courts have reviewed termination clauses against the CLC

The Sager decision offered the Court one of the first opportunities to apply the principles set out in Fred Deeley to the federal sector.

The Facts

The plaintiff, Mr. Sager, was employed as the Vice-President of Sales and Customer Care at a federally-regulated transportation and logistics company. Mr. Sager was dismissed after just under three years of service.

Mr. Sager’s employment was governed by an agreement which provided that, in the event of termination, he would receive the greater of three months’ base salary or one month base salary per year of completed service to a maximum of 12 months. The agreement also stated that “payment shall be inclusive of any and all requirements” owing to Mr. Sager under the CLC.

In addition to base salary, Mr. Sager received a car allowance and participated in a group insurance plan, pension plan and a bonus program, with a value of up to 30% of his base salary.

At the time his employment was terminated, Mr. Sager was provided with three months of his base salary but the company resisted paying any amounts towards his accrued bonus.