Egan v. Harbour Air Seaplanes LLP: B.C. Court of Appeal Upholds Termination Clause Referencing the Canada Labour Code

In Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222, the British Columbia Court of Appeal confirmed that a termination clause which referentially incorporates the notice and severance provisions of the Canada Labour Code is enforceable and effectively replaces the common law presumption of reasonable notice.

Background

Mr. Egan was employed by Harbour Air as Vice President of Maintenance Operations with an annual salary of $170,000 plus bonuses and benefits. His employment was terminated without cause in March 2020 due to the financial impact of the pandemic. His employment contract allowed the company to terminate his employment at any time without cause “so long as it provides appropriate notice and severance in accordance with the requirements of the Canada Labour Code.”

On termination, Harbour Air paid him two weeks’ wages and five days’ severance in accordance with sections 230 and 235 of the Canada Labour Code. Mr. Egan sued for wrongful dismissal, arguing that the clause was ambiguous and failed to meet the statutory requirements because it did not ensure continuation of his benefits or bonus during the notice period. He also claimed that the words “at least” in section 230(1)(a) of the Code made the minimum notice provisions unclear and meant that the contract could not displace the common law presumption of reasonable notice.

Decision of the Trial Judge

The trial judge dismissed the claim, finding that the termination clause was clear and compliant with the Code. The judge held that the clause clearly displaced the common law right to reasonable notice by incorporating the statutory notice and severance provisions. Harbour Air’s payment of the Code minimums was found to meet its contractual obligations.

Decision on Appeal

The Court of Appeal agreed with the result but corrected some aspects of the trial judge’s reasoning. Justice Fisher held that the clause was neither ambiguous nor illegal. Although the trial judge had misapplied some interpretive principles, she ultimately reached the correct outcome. The Court held that the clause clearly expressed the parties’ intention to limit notice to what the Code required and that no special language such as “only” or “minimum” was necessary to displace common law notice.

The Court rejected Mr. Egan’s argument that the reference to “at least” in section 230(1)(a) of the Code created ambiguity. It found that the clause incorporated the statutory provisions as a whole and that it was clear both parties intended to be bound by the Code’s notice and severance framework. The Court also rejected the argument that the clause unlawfully excluded benefits or bonuses during the notice period, noting that the clause was silent rather than exclusionary and therefore did not attempt to contract out of any statutory obligations.

Significance

This decision confirms that a termination clause which simply refers to the notice and severance requirements of the Canada Labour Code will be enforceable if drafted clearly. It also establishes that the clause need not expressly convert the statutory minimums into a maximum. The key consideration is whether the parties’ intention to replace common law reasonable notice with the statutory requirements is clear at the time the contract is made.

The case also reinforces that silence about benefits or bonuses does not invalidate a clause. A termination clause will only be void if it expressly excludes obligations required under the Code or attempts to provide less than the statutory minimums.

The decision is inconsistent with recent decisions reached in Ontario. The British Columbia Court of Appeal specifically rejected the employee’s argument that ambiguity could be found in the termination clause by focusing on the words “at least” in the relevant provision of the Canada Labour Code.

it preferred to read the contract as a whole in the context of the circumstances at the time of execution.

In February of this year, an Ontario court found that a termination provision in an employment agreement was unenforceable for including language that an employer could terminate “at any time” and in its “sole discretion”, which the court reasoned would, by inference, allow termination in circumstances contrary to the Ontario Employment Standards Act, 2000.[2]

These two approaches are distinctive.

Key Takeaway

For federally regulated employers, a clause stating that the employee will receive notice and severance “in accordance with the Canada Labour Code” is sufficient to displace common law notice. The clause will be upheld provided it does not contract out of any statutory entitlements and the parties’ intent to rely on the Code is clear.

Reference

Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222
Read the full decision on CanLII