The court upheld the enforceability of a termination clause in an employment contract
The BC Court of Appeal upheld the enforceability of a termination clause in an employment contract that adhered to the Canada Labour Code, thereby displacing the presumption of common law reasonable notice.
In Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222, Gerard Michael Egan challenged the dismissal of his wrongful termination lawsuit against Harbour Air Seaplanes LLP. Egan, who was terminated without cause in March 2020 due to the COVID-19 pandemic, argued that he was entitled to reasonable notice at common law. The court, however, upheld the enforceability of the termination clause in his employment contract, which incorporated the notice and severance provisions of the Canada Labour Code.
Egan has been employed as vice president of maintenance operations since May 2017. Harbour Air, a federally regulated business, terminated his employment without cause, citing a downturn in business. Harbour Air paid Egan based on two weeks' salary in lieu of notice and five days of severance pay, as stipulated in the code.
Egan filed a wrongful dismissal action seeking reasonable notice at common law. Harbour Air sought summary dismissal, arguing that the termination clause in Egan's contract precluded such a claim. The summary trial judge agreed, dismissing Egan's action.
The appeal centred on the enforceability of the termination clause. Egan contended that the clause was ambiguous and did not clearly define his termination entitlement. He also argued that the clause allowed Harbour Air to change his employment conditions, contrary to the Code.
The Court of Appeal dismissed Egan's appeal but for reasons different from those of the summary trial judge. The court found that the termination clause was neither ambiguous nor non-compliant with the code and was sufficient to rebut the presumption of reasonable notice at common law.
The court emphasized that the contractual interpretation must consider the employment contract and the factual context at execution. It noted that while the code requires "at least" two weeks' notice for termination, Harbour Air's payment of two weeks' wages in lieu of notice was clear and unambiguous.
The court also addressed Egan's argument about the continuation of benefits. It concluded that the termination clause did not permit Harbour Air to contract out of its statutory obligations and that the clause obliges Harbour Air to comply with the code's requirements regarding notice and severance.
