The Risks of Your Condo Being a Boss

Our general advice is that condominium corporations should avoid directly employing superintendents, cleaners and other staff; however, if a condominium corporation chooses to do so, it is imperative that it have an employment contract in place to protect its interests (and, by extension, the interests of unit owners) and govern the relationship. This is particularly important in addressing termination rights and obligations. The Ontario Superior Court decision of Stevens v. Sifton Properties Ltd. (2012), 2012 CarswellOnt 16792 [“Stevens”], illustrates the importance of precise wording in employment contracts, particularly termination clauses.

The employment contract at issue in Stevens contained a relatively common termination clause: the employer had the right to terminate the employee’s employment at any time without cause by providing the employee with notice or payment in lieu thereof and severance pay, in accordance with the Employment Standards Act (the “ESA”), and specified that the employee was required to accept same in satisfaction of any and all claims and demands that they may have against the employer with respect to the termination of their employment.

Termination clauses are essential in limiting an employer’s financial exposure upon termination of an employee but cannot ignore the statutory minimum requires set out by the ESA. Specifically, subsections 5(1) and 61(1) of the ESA. Subsections 5(1) and 61(1) of the ESA provide that employers cannot contract out of the minimum statutory requirements of the ESA and if a contractual provision attempts to do so the contractual provision will be void and unenforceable.

In Stevens, the Ontario Superior Court found that by including wording to suggest that the amount paid in lieu of notice would be accepted by the employee in satisfaction of any and all claims and demands that they may have against the employer with respect to the termination of their employment, the termination clause did in fact attempt to contract out of the minimum statutory requirements.

The Ontario Superior Court noted that the termination clause at issue drew a circle around the employee’s rights and entitlements upon termination, which had the effect of excluding benefit contributions during the statutory notice period, which the employee was entitled to pursuant to subsection 61(1) of the ESA.

The impact of this finding had a material and negative effect on the employee. When the Ontario Superior Court held that the termination clause at issue was void and unenforceable, it resulted in the employee being entitled to claim reasonable notice of termination at common law – a significantly greater amount than what the employee would have otherwise been entitled to if the termination clause was upheld.

Stevens highlights the importance of having enforceable employment agreement and understanding the risks associated with attempting to put a cap on an employee’s entitlements in termination clauses or using precedent material that may not be fully understood (this logic applies equally to the use of an type of precedent material). Condominium corporations should ensure that their employment contracts are reviewed on a periodic basis by their legal counsel to ensure that the provisions in same remain valid and enforceable as the law continues to evolve. 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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