Signing a contract in the board room

Barbara Green and Stephanie Lanz on Henderson v Slavkin


Henderson v Slavkin deals with an employee bringing a claim against her employers, two dental surgeons operating a private practice in the GTA (the “Defendants”). Rose Henderson, (the “Plaintiff”) worked as a receptionist at one of the dental offices since April 1990.

In May 2015 the Defendants were planning their retirement from private practice and decided to implement new employment contracts for all staff, including the Plaintiff, so the employees could know what to expect from the Defendants’ impending retirements. Before this, the employers had never implemented written employment contracts. The Plaintiff signed the new employment agreement and continued working as a receptionist for the Defendants.

In November, 2019, the Defendants told their employees that they would be retiring in March, 2020 and that all employees would be terminated as of April, 2020. The Plaintiff worked until February, 2020 when she went on vacation and then took paid sick leave until the official termination date. The Defendants paid the Plaintiff her full salary throughout this time.

Due to COVID-19, the government mandated closures of dental offices which coincided with the Defendant’s intentional closure of its practice. At this time, the Plaintiff did not seek new employment until the end of 2020. In January 2021, the Plaintiff sought and secured new employment.

The Plaintiff brought a claim asserting that the new employment contract that she signed in 2015 was unconscionable and contained clauses that were contrary to the Employment Standards Act (the “ESA”).  As a result, she argues that she was wrongfully terminated and is entitled to common law damages.

The new employment agreement had 3 clauses the Plaintiff argued were invalid: a termination clause, a conflict of interest clause, and a confidentiality clause.

The Defendants argue that the employment contract was valid.

The Court’s Analysis:

The court begins its analysis by restating the framework for the determination of the enforcement of a termination clause: where an employment agreement is not consistent with the ESA, it becomes invalid irrespective of the actual arrangement made with an employee on termination, and the terminated employee becomes entitled to common law damages.

As it relates to the termination clause, the court found that there was no inconsistency between the clause and the ESA and it was therefore valid.

The conflict of interest clause:

The conflict of interest clause stipulated that the employee cannot have any personal interests that potentially or actually conflict with the employers’ interest. The clause listed some examples of what would constitute a conflict of interest and stated that: “A failure to comply with this clause above constitutes both a breach of this agreement and cause for termination without notice or compensation in lieu of notice”.

The Plaintiff argued that any behaviour that does not constitute wilful misconduct cannot constitute dismissal for cause. Under the ESA, the standard for just cause termination entitles even those terminated with cause to minimal entitlements unless the employer can establish that the employee is guilty of wilful misconduct or wilful neglect. The court found that the clause in question was not only overly broad and ambiguous, but also had words missing such that an employee entering into the contract would not be able to know what conduct would amount to a potential cause for termination without notice or compensation in lieu. For these reasons, the judge ruled that the conflict of interest clause was invalid and unenforceable.

The confidentiality clause:

The confidentiality clause forbid the disclosure of confidential information and laid out examples of what constituted confidential information. The clause then stated: “In the event that you breach this clause while employed by the Employer, your employment will be terminated without notice or compensation in lieu thereof, for cause.”

The Plaintiff argued that the clause does not state that the breach must be ‘wilful’ or ‘non trivial’ to support a termination without notice, which is the standard dictated by the ESA.

The court again looks to the principle that a termination clause will rebut the presumption of reasonable notice only if its wording is clear as employees are entitled to know at the beginning of an employment relationship what their employment will be at the end of their termination, as well as how and when it may be terminated without cause.

In this case, the court found that the confidentiality clause is not clear as to what circumstances in which the disclosure of confidential information may occur without immediate termination for cause without notice. The court notes that there is a likely situation where confidential information is inadvertently disclosed but it is not wilful or it is a trivial breach. In this respect, the court found that the confidentiality clause does not respect the ESA and therefore declared this clause invalid and unenforceable.

Ultimately, the court concluded that the entire employment contract, including the valid termination clause, was invalid because of the two clauses that were non-complaint with the ESA and that the Plaintiff was wrongfully dismissed and entitled to common-law damages.

Key Takeaway:

Employers should be aware and make sure that not only their termination clauses are valid and in accordance with the ESA, but that every clause in the agreement is in fact up to the ESA standards in order for the agreement to be binding and effective.

Written by Barbara Green and Stephanie Lanz