Warning to cross-provincial employers: update your policies and tailor your employment agreements!

The importance of having clear and unambiguous termination clauses has been reiterated again and again by our courts. We know that employers should ensure their termination clauses are well-drafted and compliant with employment laws. However, how does that work when the company or employer has employees all over Canada in different provinces? It is necessary to have different employment contracts for each province?

This was discussed in the matter of Brocklehurst v. Micro Companies Limited, 2025 NSSC 192.

Facts

• The plaintiff employee worked as a sales representative for the defendant employer for approximately eight and a half (8.5) years before he was terminated without cause in 2024.
• His employment was governed by a written employment agreement that had a termination clause that attempted to limit his entitlement upon termination to the minimum amount required by Nova Scotia's employment standards legislation.
• Essentially, the termination clause indicated that he would get his statutory minimums and nothing more.
• The employer also had a Sales Incentive Plan (the "Plan") that governed the sales representative's eligibility to earn commissions. This Plan was provided to the plaintiff approximately a month after his employment started.
• As per this employment agreement, on termination, the employer provided the employee with four (4) weeks of pay in lieu of notice in accordance with the Nova Scotia Labour Standards Code. The employer also offered two (2) additional weeks of pay in exchange for a signed release.

Issue

• The main issues were:
  • Whether the termination clause was enforceable to limit the plaintiff employee's notice upon termination to only the minimum standards; and
  • Whether the employee's sales commissions should be included in the calculation of his compensation during the notice period or if it was lawfully limited by the Plan.

Analysis

• In determining the applicability of the termination clause, the Nova Scotia Supreme Court found that there were two key issues with the termination clause.
  • The clause was ambiguous because the provision referred to "severance pay (if applicable)".
    • Here's the first problem: unlike Ontario, "severance pay" does not actually exist in Nova Scotia's employment standards legislation.
    • In the clause, the two entitlements (namely, minimum notice of termination and severance pay) were connected by an "and" which implied that the employee could receive both, despite severance pay not being required under Nova Scotia legislation. This created an ambiguity. As such, the court found that this reference to "severance pay" in the termination clause could reasonably be interpreted as referring to common law reasonable notice
  • The court also found that there was no express, clear, and unequivocal language that limited or waived the employee's entitlement to common law notice.
• Given the termination provision was found to be unenforceable, the court also considered whether the employee was entitled to commission during the notice period. On reviewing the employer's Plan, the court found that it was not enforceable. The Plan had not been updated in a while, and only expressly applied to the 2016 fiscal period. Accordingly, it was not valid to limit the employee's entitlements in 2024, when he was terminated.

Result

• The employee was awarded eight (8) months' notice at his full compensation rate. This included his base salary, commissions, and benefits.

Takeaway

• This case once again shows us the importance of tailoring and updating employment agreements and workplace policies.
• Employment law evolves relatively quickly. We have seen the law around termination clauses change greatly over the last few years. A clause which was enforceable five years ago may not be enforceable anymore.
• Therefore, it is important that employers routinely review and update their employment agreements to minimize the risk of large damage payments, like the one in this case. The same can be said about workplace policies.
  • Note: if your employment agreement is updated and/or revised, and you are asking existing employees to sign-off on the new version, consideration will be required for the updated version to be valid. If you have questions, please contact us.
• Second, if the employer is cross-provincial, it is particularly important to draft an employment agreement that is applicable to the particular province. While employment legislation is overall similar across Canada, there are specific aspects of the law that differ from province to province, as seen in this case. Generic "cost-saving" templates can result in costly consequences. Just because it works in one province does not mean it is automatically applicable in another.

It is best to speak with an employment lawyer to ensure that your employment agreements are tailored to the specific province and to ensure that the agreements and policies are updated. Reach out today if you would like your employment agreement reviewed!