In Johnson v. IBM Canada Ltd. (2019 BCSC 592), the BC Supreme Court determined that a termination clause was enforceable despite some awkward wording. The termination clause – found in the plaintiff’s employment contract – was worded as follows:
Termination of Employment
If you are terminated by IBM other than for cause, IBM will provide you with a separation allowance in lieu of notice equal to the greater of IBM’s current separation practice (i.e. one week’s notice/salary for every fully completed six months of service) or three months of your annual salary. This includes any and all statutory obligations. This amount will not be less than the minimum statutory termination pay and severance pay requirements.
The Court considered whether the termination clause was ambiguous and whether it could potentially provide less than the minimum Employment Standards Act requirements. One issue was that the termination clause did not set out how the parties would calculate the plaintiff’s salary for termination pay purposes (the employer had calculated the plaintiff’s termination pay based on his average earnings over the previous three years).
In determining whether the termination clause was sufficiently clear, the Court first referred to basic principles of contract interpretation which require contract terms to have a “reasonably ascertainable meaning”:
[25] Every effort should be made to find meaning in a contract. However, the effort does not permit giving meaning that is not present. The courts are not to make contracts for parties. However, difficulty in interpretation does not equate to an agreement being void for uncertainty. If the words are sufficiently capable of reaching a reasonably ascertainable meaning as distinct from the correct meaning, then the rule of uncertainty does not operate.
Although “not a masterpiece of drafting”, the Court determined that the termination clause was nonetheless sufficiently clear to be enforceable. The manner in which the employer calculated the plaintiff’s termination pay was “within the proper reading of the termination provision.”
And it was held that the termination clause could not be in breach of the Employment Standards Act, because the final sentence of the clause ensured that the plaintiff would not receive less than the minimum requirements in any event:
I hold that the last sentence of the subject provision is intended to ensure that the termination provision does not violate the minimum provisions as set out in the Act.
As a result, the termination clause was enforced and the plaintiff’s wrongful dismissal claim was denied.