Machtinger v. HOJ Industries: Contracts Below the ESA Minimum

The case

Two managers at a car dealership had contracts that allowed the employer to dismiss them with no notice in one case and two weeks' notice in the other. That was less than the Ontario employment standards legislation of the time required. When they were dismissed after about seven years each, the question was whether they were entitled only to the statutory minimum or to reasonable notice at common law.

The Supreme Court held that the clauses were void because they tried to contract out of the statutory minimum. With no valid clause left, the presumption that an employee is entitled to reasonable notice applied. Justice Iacobucci reasoned that if employers could simply be ordered to pay the minimum when caught, they would have little reason to comply with the Act in the first place.

Why it matters now

• Ontario's Employment Standards Act, 2000 says employers can't contract out of its standards, and Machtinger tells courts what follows when they try.
• Courts look at whether a clause could breach the Act in any circumstance, not just on the facts that happened. A clause that might give less than the minimum in some future situation can fail.
• Clauses that leave out benefits continuation, or that allow termination without the minimums for conduct short of wilful misconduct, have often been struck down for this reason.
• A clause can only cut down common law notice if it does so clearly and complies with the Act in full.

If you've been dismissed

1. Find your signed contract and any later versions or offer letters.
2. Have the termination clause reviewed, including the clause about dismissal for cause.
3. Compare what you were offered with the ESA minimums and with likely common law notice.
4. Remember the limitation period: generally two years from the dismissal for a court claim.

Common questions

If my clause gives exactly the ESA minimum, is it valid?

It may be, if it is clear and complies with the Act in every respect, including benefits and the rules for dismissal for cause. Each clause has to be read as a whole.

Does a severability clause save an illegal termination clause?

Usually not. Ontario courts have held that a severability clause can't rescue a termination provision that breaches the Act.

Photos from Pexels: A Lady Justice statue holding the scales · Law books on a library shelf.

This article is general information for people in Ontario, not legal advice. Rules, forms and deadlines change, and every situation is different. Check the current rule or speak to a licensed legal professional before you act.