Miller v. AlayaCare Inc.: Lessons on Termination Clauses, Inducement, and Employer Risk
The Ontario Superior Court’s recent decision in Miller v. AlayaCare Inc., 2025 ONSC 1028 serves as a crucial reminder for employers about the enforceability of termination clauses and the potential impact of inducement in wrongful dismissal cases. Despite only six months of service, the plaintiff was awarded a 14-month notice period, highlighting the risks associated with improperly drafted employment agreements and recruitment practices.
Background
The plaintiff, a senior executive, was actively recruited by AlayaCare from her previous employer, WellSky, where she had worked for 12 years. She was enticed with promises of increased compensation, bonuses, and restricted share units (RSUs). However, after just seven months, she was terminated without cause.
The employer relied on an employment agreement and offer letter that attempted to limit her notice period to four months of base salary. The plaintiff challenged the enforceability of these documents, arguing that the termination provisions violated Ontario’s Employment Standards Act, 2000 (ESA) and that she was entitled to common law reasonable notice.
Key Issues and Court Findings
1. The Termination Clause Violated the ESA
The employment agreement included a provision allowing termination “for cause” without notice. The court ruled this provision was unenforceable because it did not align with the ESA, which only permits termination without notice for wilful misconduct. Citing Waksdale v. Swegon North America Inc., the court found that an invalid “just cause” clause rendered all termination clauses in the contract void.
2. The Offer Letter Did Not Displace Common Law Notice
The employer argued that the offer letter, which promised a “minimum” of four months’ base salary upon termination, governed the notice period. However, the court held that it did not clearly limit the employee’s entitlement to common law notice, as required by Machtinger v. HOJ Industries Ltd. and Nemeth v. Hatch Ltd.. As a result, common law notice applied.
3. Inducement Lengthened the Notice Period
A major factor in the 14-month notice award was that the plaintiff had been induced to leave secure, long-term employment. The court cited AlayaCare’s recruitment efforts, including its willingness to match the plaintiff’s prior compensation and indemnify her against legal action from her former employer. The decision confirms that inducement can significantly extend notice periods, particularly when an employer actively lures an employee away from stable employment.
4. Additional Bardal Factors Considered
Beyond inducement, the court assessed several other factors:
Nature of Employment: The plaintiff held a senior executive position, justifying a longer notice period.
Age: At 62, she faced greater challenges in finding comparable employment.
Length of Service: Although she was employed for only seven months, the court considered her 12 years of experience in the industry due to the inducement factor.
Non-Competition Clause: The plaintiff argued this clause should lengthen the notice period, but the court rejected this claim as there was no evidence it impacted her job search.
Lessons for Employers
Ensure Termination Clauses Are ESA-Compliant
Any termination provision that fails to meet ESA minimums can render the entire agreement unenforceable.
Inducement Can Extend Notice Periods
Actively recruiting an employee from stable employment can significantly increase an employer’s liability in a wrongful dismissal claim.
Offer Letters Must Be Clear and Unambiguous
If employers intend to limit common law notice, they must use explicit language stating that the contractual notice period is the exclusive entitlement upon termination.
Executive Roles Attract Longer Notice Periods
Senior employees with specialized expertise will generally receive longer notice periods due to the difficulty of securing comparable employment.
Conclusion
The Miller decision underscores the importance of well-drafted employment agreements and the risks of improperly handling executive terminations. Employers must ensure their contracts comply with the ESA, use clear language to displace common law notice, and be mindful of the implications of inducement when recruiting employees from stable positions.
By proactively addressing these issues, employers can reduce exposure to costly wrongful dismissal claims and avoid similar legal pitfalls in the future.
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