Issue link: https://www.e-digitaleditions.com/i/1192317
Lawson Lundell LLP 33 Employment Employment Law - Termination Obligations What's the case name? Holm v AGAT Laboratories, 2018 ABCA 23 (Court of Appeal of Alberta, January 18, 2018) What are the lessons for my legal team? • To restrict an employee's right to compensation on termination without cause to the "statutory minimum" the contract must contain a provision which specifies the formula for the determination of that amount and expressly exclude the right to common law severance (which is provided for in the ESA). • Contracts should not import obligations specified by statute and formulas for determining payments under a contract should not rely on variables outside the contract. • The clause should read something like "The amount payable by the Employer in the event of termination without cause will be an amount of salary equal to one week for each year of employment less than two years and two weeks for each year of employment more than two years. The Employee agrees that the Employee is not entitled to any other compensation for termination under common law, statute or any other right of any kind and that this amount settles all obligations of the Employer to the Employee". What happened? Holm had an employment contract with AGAT which provided that if he was terminated without cause: "… [AGAT] will pay you, in lieu of such notice, a severance payment equal to the wages only that you would have received during the applicable notice period. This will be in accordance with the provincial legislation for the province of employment." His agreement contained three clauses which solemnly confirmed that this was the only compensation to which he was entitled. [(the "ESA")] provides that if an employee is terminated without cause the employee is entitled to be paid the equivalent of one week's pay, if the employee has worked for between three months and two years. But the ESA also provides that the employee is also entitled to whatever additional amount of compensation for termination that may be awarded under common law. The common law provides for a greater entitlement to severance than the ESA. AGAT intended that this would limit its payment to Holm to the lesser amount, which is often referred to as the "statutory minimum". But the contract did not exclude the common law entitlement and it did not specify a formula for determining compensation on termination. Who complained? Holm complained AGAT had constructively dismissed him. AGAT appealed the decision and the Court considered the issue of quantum of compensation or termination. Who won? Holm. What changed in the law? Nothing. This issue has been litigated with some frequency.