Summary
In Ghazvini et al v. Canadian Imperial Bank Of Commerce, 2025 ONSC 5218 (“Ghazvini”), two former employees working at a federally regulated bank relied on Ontario case law to challenge their termination clauses under the Canada Labour Code, RSC 1985, c L-2 (the “CLC”). The Ontario Superior Court of Justice held that the clauses were unenforceable because the “for cause” provision purported to allow termination in circumstances broader than would be permitted under the CLC’s strict “just cause” standard, consistent with the principles from the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391 (“Waksdale”). Further, the Court, although ultimately declining to decide the issue, supported the notion that the language in the “without cause” provision, permitting the employer to terminate employment at “any time,” also risked conflicting with statutory protections in accordance with emerging jurisprudence. The Court held that such deficiencies could not be cured by a savings provision. As a result, Canadian Imperial Bank of Commerce (“CIBC”) owed the Plaintiffs common law reasonable notice, which was significantly higher than the amounts provided for under their employment agreements.
Basic Facts
The Plaintiffs, former Mobile Investment Consultants at CIBC, were terminated without cause during a company restructuring. They did not sign a release and thus were paid only their minimum entitlements under the CLC.
The Plaintiffs argued that the termination clauses in their employment contracts were invalid because they violated CLC minimum standards in at least two respects. First, the Plaintiffs argued that the provisions permitted their termination “at any time,” which could, in theory, conflict with situations where termination is prohibited under the CLC. Further, the Plaintiffs argued that the “for cause” provision listed reasons for termination that may not meet the legal threshold for just cause, as defined under the CLC. In advancing both arguments, the Plaintiffs relied on case law decided under Ontario’s employment standards legislation, including Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, and the seminal holding in Waksdale. The Plaintiffs also argued that these defects could not be cured by the savings provision in their contracts.
In contrast, CIBC argued that their termination provision was valid, enforceable, and was already upheld in Horwitz v. Canadian Imperial Bank of Commerce, 2019 ONSC 7583 (“Horwitz”). Consistent with the above, the Plaintiffs countered that the decision in Horwitz was inapplicable in this case, particularly given the decision in Waksdale (which came out after the decision in Horwitz), as well as recent developments in the law.
The Decision
Justice Merritt agreed with the Plaintiffs’ submissions, declining to follow the decision in Horwitz, and ultimately determining that CIBC’s termination clause was unenforceable. The relevant provisions were as follows:
Termination of Employment
By CIBC for Cause – CIBC may terminate your employment at any time without advance notice, or pay in lieu of notice, for Cause. Cause includes, but is not limited to, dishonesty, fraud, breach of trust, failure to perform your duties in a satisfactory manner, a breach of the Code, failure to obtain or maintain any required TLAs, failure to complete the pre- employment screening process to the satisfaction of CIBC, providing false, misleading or inaccurate information during the hiring process, a breach of any other term or condition of your employment, and any act or omission recognized as Cause under applicable law. If your employment is terminated for Cause, you will have no entitlement to any notice of termination, payment in lieu of notice of termination, severance or any other damages whatsoever (the “For Cause Provision”).
By CIBC without Cause – CIBC may terminate your employment at any time without Cause. If your employment is terminated without Cause, you will receive two weeks’ notice or pay in lieu of such notice, or a combination thereof, for each completed year of service, provided that you sign a full and final release in a form satisfactory to CIBC (the “Release”). The total period of notice or pay in lieu of notice, or combination thereof, shall be no less than three weeks and no more than eighteen months. Pay in lieu of notice may be provided in a lump sum, or by way of periodic payments and may be subject to mitigation, at the discretion of CIBC, in accordance with applicable laws.
If you do not sign the Release or if your employment is terminated within three months following the start of your employment, you will only receive your minimum entitlements pursuant to applicable employment standards legislation, and will not be entitled to any additional notice of termination, pay in lieu of such notice, or severance pay (the “Without Cause Provision”).
Compliance with Legislation – CIBC will comply with all requirements of applicable employment standards legislation. If any of the above Termination of Employment provisions do not conform to the notice and severance requirements of applicable employment standards legislation, the statutory minimums shall apply and be considered reasonable notice and severance (the “Saving Provision” and, in its entirety, the “Termination Provision”).
Justice Merritt found that CIBC’s termination clause was illegal because it attempted to contract out of section 229.1 of the CLC, which provides for statutory minimum entitlements upon termination, except for employees dismissed for “just cause.”
Justice Merritt stated that it was not clear from the items listed in the “for cause” provision that the Plaintiffs could be terminated without notice only for misconduct that would amount to just cause under the CLC; rather, Justice Merritt noted that the listed items in the “for cause” provision included misconduct that may not be just cause under the CLC depending on the context and surrounding circumstance. Justice Merrit, at paragraph 58 of the decision, held that where an employment contract defines ‘cause’ more broadly than statute, permitting termination without notice in circumstances where the statute prohibits it, the contract breaches the statute. The result is that the termination clause is void and unenforceable.
Justice Merritt seemed to favour the argument that the inclusion of the “any time” language in the “without cause” provision could also invalidate the termination provision, given that such language could suggest a termination in circumstances prohibited by the CLC. Justice Merritt noted that most of jurisprudence supporting such a proposition had been decided under the Ontario Employment Standards Act, 2000, SO 2000, c 41, and noted that the CLC contains even stricter language regarding the timing of terminations. Nevertheless, Justice Merritt ultimately declined to decide this issue because the entirety of the termination provision had already been invalidated, in accordance with Waksdale principles.
Upon deciding that the termination provision was invalid, Justice Merritt also held that the saving provision, which was intended by CIBC to ensure that the employees received their CLC minimum entitlements in the case of a discrepancy or invalidity (thereby maintaining statutory compliance), could not cure the defects in the offending language, in accordance with the Ontario Court of Appeal’s decision in Rossman v. Canadian Solar Inc., 2019 ONCA 992. Justice Merritt noted that the proper use of a savings clause is instead to safeguard against changes to legislation, and not to save language which violates statutory requirements. Justice Merrit further reasoned that employers must have an incentive to comply with the CLC’s minimum requirements and should not be able to capitalize on employees’ ignorance of the law.
As a result of Justice Merrit’s finding that the Plaintiffs’ termination clauses were unenforceable, CIBC thus failed to rebut the common law presumption of reasonable notice upon termination, thereby entitling the Plaintiffs to seven (7) and twelve (12) months of notice, respectively.
Takeaways for Employers
This decision affirms Waksdale and the principles therein, thereby extending these principles to federal employment legislation (the CLC) and federally regulated employment relationships at least in Ontario. It remains to be seen if the courts in other provinces will adopt a similar approach or interpretation. As one example of a divergent approach in another province, the British Columbia Court of Appeal in Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222 upheld the termination of an employee with similar discretionary termination language and references to “any time” in the federal sphere.
In any event, it is clear that, in Ontario, termination clauses that define “cause” or that refer to a standard that includes anything other than what is explicitly provided for by the governing employment standards statute run the risk of being held unenforceable. In other words, employers should certainly avoid listing behaviour that they deem to be “just cause” in their employment contracts.
While the decision in Ghazvini poses nothing new for the vast majority of employers in Ontario, this decision represents a cautionary tale for federally regulated employers emphasizing how important it is to have your employment agreements regularly reviewed by counsel to reflect the latest case law and increase the likelihood they will be enforced.
Need More Information?
For more information or assistance with employment agreements and their enforceability, contact Travis Carpenter at tcarpenter@filionlaw.com, or your regular lawyer at the firm.