In Bryant v Parkland School Division, 2022 ABCA 220, the Court of Appeal for Alberta (ABCA) allowed an appeal from a summary dismissal by the Court of Queen’s Bench of Alberta (ABQB) in Bryant v Parkland School Division, 2021 ABQB 391.  The ABQB dismissed a claim made by three employees for common law reasonable notice because it found that the termination clause in the standard form employment contracts, which entitled them to “sixty (60) days or more written notice,” was not ambiguous.  In allowing the appeal, the ABCA found the termination clause to be ambiguous.  The ABCA referred the matter back to the ABQB for determination of common law reasonable notice, if the parties could not agree.

Background

Three long-term employees signed a standard form employment contract.  The termination clause read as follows:

This contract may be terminated by the Employee by giving to the Board thirty (30) days or more prior written notice, and by the Board upon giving the Employee sixty (60) days or more written notice. [emphasis added]

When their employment was terminated with 60 days’ notice, the employees brought an action claiming common law reasonable notice.

Decision of ABQB

The lower court found that the words “or more” did not render the termination clause ambiguous “merely because an employee is unable to ascertain how much notice in excess of 60 days they may receive.”  The court stated that on a plain reading, the clause provided for a fixed 60 days’ notice and allowed the employer to give more notice at its discretion.  The ABQB found that the clause clearly and unequivocally set a notice period and denied the claim for common law reasonable notice.

The employees appealed. 

Decision of ABCA

The ABCA disagreed with the lower court. Citing judicial precedents, the court stressed that different principles apply to the interpretation of employment contracts compared to other commercial contracts because of the power imbalance and inequality of bargaining power inherent in the employment relationship, and employees’ limited opportunity to negotiate contractual terms. The ABCA also noted that courts have repeatedly recognized the significance of work and the manner in which employment is terminated to an individual’s life and well-being. 

The ABCA then referred to the following principles of interpretation that have evolved in the case law for the protection of employees:

• If a termination clause could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee; and
• Employment contracts are presumed to contain an implied term requiring common law reasonable notice of dismissal; this presumption can be rebutted only where the contract unambiguously limits or removes that right.

The ABCA stated that the lower court did not properly apply these principles in its analysis and that had it done so, it would be clear that the termination clause did not unambiguously limit the right to reasonable notice by clearly fixing notice entitlement.  With the inclusion of the words “or more,” there was no upper limit on the amount of notice an employee was entitled to receive; 60 days was not the maximum notice as the termination clause explicitly provided that an employee could be entitled to more notice.

The ABCA agreed with the lower court’s observation that “if the contract contained only the words ’60 days’ it would be abundantly clear that [the employer] had fixed its notice at 60 days.”  It characterized such language as “clear and unambiguous” but noted that the clause did not contain such language.

The ABCA characterized the lower court’s conclusion that the employer had given itself the discretion to decide the amount of notice owing as “a questionable conclusion,” and stated that if that was intended, then the employer could have drafted the contract accordingly. The ABCA found that a more reasonable interpretation “is that the employer intended the notice period to be in accordance with common law standards, subject to a minimum notice period of 60 days.”  The court’s key finding was that the clause was not sufficiently clear, unequivocal and unambiguous to remove or limit the presumed common law right to reasonable notice. The ABCA stressed that “[t]he reading more favourable to the employee must prevail.” 

Bottom Line for Employers

The decision in Parkland is yet another example of why it is important that employers review their employment contracts to ensure their compliance with the applicable employment standards statute and principles of interpretation that have evolved in the case law. 

Employers that intend to include termination clauses in their employment contracts should consider language that unambiguously limits or removes the right to common law reasonable notice. Such language should also preserve all statutory minimum entitlements. 

Employers are encouraged to seek the advice of experienced employment counsel to draft new employment contracts, and to regularly review existing employment contracts to ensure their enforceability because of constantly evolving case law.