Irfan Kara talks fail safe clauses with Benefits Canada

Associate Irfan Kara has given his advice to employers on termination clauses in an article by Benefits Canada that discusses the outcome of an Ontario Court of Appeal case.

In Andros v. Colliers Macaulay Nicolls Inc., the OCA took a “technical approach” in interpreting a failsafe clause. An excerpt from the article is below.

The case originated with Demetri Andros’ dismissal without cause from Colliers International Canada, a large commercial real estate services company. His employment contract contained a termination provision that granted Andros “the greater” of his entitlements under the ESA, “or, at the company’s sole discretion, either of the following: a. two months working notice… b. payment in lieu of notice in the amount equivalent of two months base salary.”

The court found the termination clause was unenforceable because, as Andros’ lawyer argued, “both notice clauses failed to provide entitlement to the minimum severance or benefits entitlements under the ESA. Colliers argued the termination provision afforded Andros the greater of his ESA entitlement or either of the notice options.”

“What was fatal to the failsafe clause in this case was that it split up the failsafe and the two other options,” Irfan told the publication.

“So my advice to employers is to include failsafe provisions at the end of a termination clause because these will more likely be interpreted as extending to the entire clause than if the provision was contained amid other subclauses.”

The article also mentions partner Lisa Talbot who has previously spoken with Benefits Canada on failsafe clauses in Amberber.

“The failsafe IBM used met the mustard. So don’t take any chances by departing from it,” Lisa said.

Read more of Lisa’s comments in "Lisa Talbot tells Benefits Canada IBM’s failsafe 'met the mustard'".

You can learn more about Torys’ Litigation and Dispute Resolution work on the practice page.