Written by James J. Heelan, Barbara J. Stratton, Matthew Riskin, Tatum J. R. Woywitka and Emily Hole
Canadian courts have often been swayed by arguments of fairness from plaintiff employees regarding the interpretation of their employment contracts in an employment dispute. There has been a general judicial recognition of the inherent imbalance in bargaining position between the employer and employee with the result that courts seemed to find in favour of the employee more readily than the employer, particularly when contractual interpretation was involved.
For example, in one Albert Court of Appeal case, the court found that an employment contract referencing the Employment Standards Code [Code] as the standard for determining reasonable notice entitlement on termination, did not limit reasonable notice to the termination provisions under the Code, but rather included the entire Code. Of course, this includes section 3, preserving one's right to sue under the common law, which typically provides far greater reasonable notice entitlement (Kosowan v Concept Electric Ltd., 2007 ABCA 85). Along these same lines, another Alberta case found that in order to limit an employee's notice entitlement to the Code's termination provisions, it must be clear and unambiguous rather than a broad reference to the Code and "guidelines" under the Code (Gillespie v 1200333 Alberta Ltd, 2012 ABQB 105). Another Alberta Court of Appeal decision found that the "spirit" of the Code required an employer to be clear and explicit of its intention to rely on its strict rights under the Code to ensure there is no misunderstanding between the employer and employee as to the respective rights and obligations of each (Vrana v Procor Limited, 2004 ABCA 126). The lesson for employers has been that careful drafting and negotiating of employment contracts is required, particularly where the contract would limit the employee's rights on termination. No contract felt secure.
However, recent decisions in Alberta, including the Court of Appeal, suggest that perhaps courts are less willing to discuss the fairness of the contract or the power imbalance between the employee and employer but rather base their decisions on strict contractual interpretation principles.
In Nutting v Franklin Templeton Investments Corp, 2016 ABQB 669, the Alberta court found that a termination provision stating that the employee was entitled to the "minimum" notice in the Code clearly and unambiguously limited the employee’s reasonable notice entitlement to the statutory minimums. In Ross v IBM Canada Limited, 2015 ABQB 563 the court relied on the terms of the employment contract which incorporated conduct guidelines that prohibited employees from using company time and equipment for personal matters. The employee was terminated on the basis that he was working for his own company during office hours of his employer. The court found that the employee’s misconduct was a clear breach of the express conduct standard that was emphasized by the employer as being at the core of the employment contract and this was just cause for termination.
The strongest language from our courts regarding contractual interpretation in an employment dispute has come from the Alberta Court of Appeal in Styles v Alberta Investment Management Corporation, 2017 ABCA 1. In this case, the Court of Appeal relied on the plain reading of the employment contract rather than the employee's argument of "good faith" and "reasonable expectations" in contractual performance. The terminated employee sued his employer for the Long Term Incentive Plan (LTIP) grants, which were not vested at the time of termination. The Court of Appeal held that the plain reading of the contract clearly stipulated that active employment on the vesting date was a condition precedent to the LTIP entitlement. The Court of Appeal was unwilling, in the clearest terms, to rewrite the contract to one that was "fair".Perhaps this is the start of an era where employers can, with more certainty, rely on the negotiated terms of their employment contracts. With this guidance from the Court of Appeal on how employment contracts are to be interpreted, we will be watching the trial level with interest over the coming months.