Tapestry Alert: Canada - Ruling finding termination provisions unenforceable overturned

Tapestry Newsletters

20 October 2021

This week the Court of Appeal of Ontario have overturned the previous decision on enforceability of termination provisions which we reported on previously here

In July last year, the Ontario Superior Court of Justice (Battiston v Microsoft Canada Inc.) found that termination provisions providing that an employee lost their right to unvested awards upon termination without cause were "harsh and oppressive". The Court also held that the employer had not taken sufficient steps to highlight these provisions to the employee. 

On the basis of this decision, we were recommending that:

  • companies review their termination provisions from a Canadian perspective to see whether they would be viewed as "harsh and oppressive"; and
  • to review the acceptance process to ensure that sufficient steps had been taken to highlight these provisions to Canadian employees. 

The employer appealed the decision. We understand that the Court of Appeal for Ontario focused on the finding that the employee had not received notice of the termination provisions. On 18 October 2021 the Court of Appeal overturned the original decision. The decision was based on a number of factors, including that the employee made a conscious decision to not read the documents, despite indicating that they had by clicking to consent. 

As a result, it is now considered more likely that tick box acceptance of general plan terms will be enforceable in Canda. 

Tapestry comment
This appeal has been underway for some time, so it is great to see a final outcome. Whilst the former employee now has 60 days to appeal, they may be unlikely to meet the high bar required for an appeal with the Supreme Court meaning this decision may continue to stand. 

This outcome means companies may go back to their previous approach of acceptance for Canadian participants (although you may want to wait the 60 days until we see whether the employee appeals the decision!). However, it is of course important to consider which provisions are worth drawing out to participants as a matter of best practice, and termination provisions may be considered by many as being a significant provision to draw out (particularly depending on the termination provisions in question). 

If you have any questions on this alert, please do let us know.

Lorna Parkin and Emilie Sylvester

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