When it comes to employment contracts, clear and enforceable language is key—especially when dealing with termination clauses. In the recent case of Plotnikoff v Associated Engineering Alberta Ltd (“Plotnikoff“), the Alberta Court of King’s Bench reaffirmed the importance of protecting employees’ rights to reasonable notice under common law. This case serves as a critical reminder for employers to draft termination clauses with precision, as vague language or discretionary terms can leave employers exposed to significant liability. For one long-serving employee, unclear wording in his contract meant a ten-month notice award and a damage payout of over $50,000—highlighting the costly consequences of an unenforceable clause.

Challenging the Language in Employment Contracts

The employee in Plotnikoff had worked for the employer for a period of ten years as a Civil Engineering CAD Technologist. In 2022, the employer terminated the employee without cause, offering him six weeks of pay in lieu of notice. This amount of notice represented the minimum guaranteed under the Alberta Employment Standards Code.

The employee rejected the employer’s offer and initiated litigation based on wrongful dismissal. At its core, the employee’s case challenged his employment contract. Specifically, it challenged the language of the contract’s termination clause. That termination clause, which attempted to limit the employee’s right to notice, stated that:

“The Company may terminate employment without cause upon providing the Employee with notice as may be mandated by the Employment Standards legislation or such additional notice as the Company, in its sole discretion, may provide or, at our option, pay in lieu of such notice.”

Court Discards Unenforceable Clause

In Plotnikoff, the court ultimately found that the employment contract’s termination clause was unenforceable. As such, it recognized that the employee had a right to rely upon his right to reasonable notice under common law. The Alberta Court of King’s Bench upheld the trial judge’s award of ten months’ notice of dismissal and a total damage award of $50,723.66 for wrongful dismissal. This award represented an affirmation of the employee’s right to reasonable notice at common law, given the failure of his employment contract to limit his entitlements to the statutory minimums guaranteed under the Alberta Employment Standards Code.

Clarity and Common Law Notice

An Unclear and Unenforceable Contract

In Plotnikoff, the employer’s contract failed in court due to its lack of clarity. When a contract’s language is unclear, it has a potential to be interpreted in multiple ways. Such clauses are generally unenforceable, based upon the fact that an unclear clause might be interpreted in a way that deprives an employee of their right to notice under employment standards legislation.

Referencing Legislation Not Enough

The termination clause in Plotnikoff demonstrates an important point regarding termination clauses in Alberta. A termination clause that provides notice as “mandated by the Employment Standards legislation” has not done enough to avoid the common law right to notice. Instead, a termination clause will only succeed when it clearly and unequivocally removes an employee’s right to common law notice.

Offering More than the Minimum

In Plotnikoff, the employment contract not only referenced employment standards legislation, it also suggested that an employee might receive “additional notice as the Company, in its sole discretion, may provide”. While seemingly clear, the court found this language to be vague enough to suggest that the employer had failed to close the door completely on common law notice entitlements. By suggesting that an employee might be entitled to notice over and above that offered by the Alberta Employment Standards Code, the employer in Plotnikoff lost the ability to rely upon legislated minimums altogether.

The key to understanding the court’s interpretation related to the contract’s reliance upon the employer’s attempt to give itself “sole discretion” to award more than the statutory minimums. While the employer likely assumed this meant that anything more was to be considered a privilege, not a right, the court found that referencing an employer’s discretion to offer any amount of notice was not a bar on the employee’s right to reasonable notice.

Right To Reasonable Notice

Plotnikoff illustrates a crucial insight regarding Alberta employment law. In an area of law that involves a balancing of contractual rights, legislative provisions, and common law principles, it is sometimes difficult to find a solid footing. Alberta employers might assume that an employee’s right to notice is governed by his or her employment contract. However, respecting entitlements to notice starts with understanding the foundational “reasonable notice” that every employee has an inherent right to in the Alberta legal system.

Reasonable Notice Entitlements

Compared to minimum entitlements guaranteed under the Alberta Employment Standards Code, reasonable notice under common law promises employees far more notice. While actual awards may vary, a general rule of thumb holds that common law notice guarantees an employee approximately one month of notice per year of employment. As compared to the minimum standards under the Employment Standards Code, paying out an employee’s common law entitlements can be extremely expensive and debilitating.

Crafting Enforceable Contracts

An employer’s best defence to costly notice awards is to ensure that its employment contracts stand up to court scrutiny. Crafting enforceable contracts is bolstered immensely by the assistance of employment law counsel equipped with up-to-date knowledge of changes to legislation and case law.

Investing in Proactive Solutions

Many organizations feel a special bond of trust and loyalty with their workforce, believing that disputes can be resolved through seeking collaborative solutions and maintaining open communication. While such resolutions can happen, employee dismissals tend to become contentious and can bring a significant amount of risk to employers seeking to rely on a contract’s termination provisions.

As a result, it is crucial that employers invest time and finances in drafting and updating their employment contracts. Putting in proactive effort to ensure that employment agreements stand up in court is the best way for an employee to maintain a firm stance when confronted by disgruntled former employees. By thinking ahead, employers protect themselves from legal landmines and ensure the longevity and success of their organization.

Termination Clauses Can Make or Break a Contract

While employment generally starts with excitement and hopes for a long-lasting and mutually beneficial relationship, employee dismissals are a fact of life that any organization has to grapple with and prepare for. As a result, there are not many more important clauses in an employment contract than a termination clause. For employers that assume a written employment contract will generally guide them through important issues, including the dismissal of employees, Alberta case law such as Plotnikoff gives a cautionary tale.

Contact Getz Collins & Associates for Trusted Workplace Legal Guidance

Both employers and employees can benefit immensely from working with experienced employment lawyers, who can review contracts, guide clients through dismissals, and help manage dynamic changes to Alberta’s employment law landscape, whether related to workplace injuries or labour action. If you or your organization has questions regarding employment law, including potential litigation, contact the trusted employment lawyers of Getz Collins & Associates at (403) 934-2500 or online.