In this case, a “construction” employee had signed an employment agreement purporting to minimize the employee’s entitlements upon termination to only those required by the Ontario Employment Standards Act, 2000 (the “ESA”).

However, the Court held the employment contract to be invalid, thereby awarding common law reasonable notice to the employee.

The fatal error by the employer was disentitling the employee in the contract to potential rights under the ESA, even if they currently were not operative.

In other words, potential violation of an employment contract with the ESA will still invalidate the contract, even if it may not at the time of signing (i.e., “construction” workers, which may not be entitled to “termination pay” under the ESA).

Of note, the Court explained:

  • The common law principle of termination of employment on reasonable notice is a presumption.
  • The presumption is only rebuttable if an employment agreement clearly specifies another period of notice.
  • The employment agreement is only enforceable if it complies with the minimum employment standards in the ESA. If it does not, the presumption is not rebutted and the employee is entitled to reasonable notice of termination.
  • Some types of employees are not protected by the ESA, including “any prescribed individuals.” (s. 3(5), ESA)
  • However, if an employee has two or more roles in their employment, and only one is not protected by the ESA, the employee will continue to be protected with respect to that other role. (s. 3(6), ESA)
  • Section 2(1) 9 of Regulation 288/01 under the ESA states that construction employees “are prescribed for the purposes of section 55 of the Act as employees who are not entitled to notice of termination or termination pay under Part XV of the Act.”

The court emphasized that since Rutledge was a construction employee throughout his employment, notice of termination (ss. 54-60, ESA) and termination pay (ss. 61-62, ESA) were the only employment standards that did not apply to him. The court said:

The regulation does not flatly disentitle Rutledge to the protection of the entire ESA as is the case for some of the other occupations listed in s. 3(5) of the ESA. Rutledge continues to be afforded the protection of all other employment standards set out in the ESA, unless otherwise specifically excluded by other legislation. Accordingly, if any wording of an employment contract purports to deny Rutledge those other employment standards, then those provisions are unenforceable. (para. 11)

The court concluded that Rutledge’s employment contract contained the following two errors that rendered the termination provision unenforceable:

[1] An employee cannot contract out of a protected employment standard under the ESA even if it does not yet apply to them.  It is enough if the provision in the contract would potentially violate the ESA at any date after hiring.  If Rutledge’s position changed to something other than a construction employee, his employment contract would deny him his right to benefits during his notice period, a right protected by the ESA.  Although the employment contract stated that Rutledge was employed as an apprentice in the construction industry, “it does not explicitly state that this applies only to him while occupied as a construction employee and that it would be of no force or effect if his position changed.” (para. 15)

[2] Construction employees are entitled to the employment standards guaranteed upon their severance (ss. 63-66, ESA).  “If Canaan grew in size, employing more than 50 employees and then discontinued its business, or else had a payroll more than $2.5 million, Rutledge would be entitled to severance pay, irrespective of his job description.  The Employment Contract clearly disentitles Rutledge to these employment standards.” (para. 16)

The Case:

Rutledge v. Canaan Construction Inc., 2020 ONSC 4246 (CanLII)

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