Nova Scotia Termination Clause Struck Down for Referencing “Severance Pay”
July 30, 2025
| By
Travis Carpenter
Labour
Bottom Line
In Brocklehurst v Micco Companies Limited, 2025 NSSC 192 (“Micco”), the Court held that the Applicant’s termination clause found in their employment agreement with the Respondent was ambiguous and therefore unenforceable. The clause failed to effectively limit the Applicant’s entitlements upon termination to only his statutory minimum amounts pursuant to the Nova Scotia Labour Standards Code, while also making reference to “severance pay,” which is not defined in the legislation. As a result, the employee was entitled to common law reasonable notice. The decision in Micco re-iterates the importance of clear, unambiguous termination language in employment contracts, as well as the need to tailor employment agreements to the jurisdiction in which an employee performs services.
Basic Facts
In the case of Micco, the decision ultimately turned on the legal interpretation of the employment agreement between the parties, and whether the termination language found therein effectively disentitled the Applicant employee from receiving common law notice upon the termination of his employment.
Upon termination, and in accordance with the Nova Scotia Labour Standards Code, the Applicant in Micco was provided with all accrued and unpaid wages (including commissions), along with 4 weeks’ pay in lieu of notice (inclusive of vacation pay). He was also offered an additional 2 weeks’ pay in exchange for signing a release.
That being said, the termination provision in the Applicant’s employment agreement stated as follows:
Termination Without Cause:
Your employment may be terminated by Micco without cause, upon provision to you of the following payments:
(i) any portion of the annual salary and accrued vacation pay, if any, that has been earned by your [sic you] prior to the date of termination by [sic, but] not yet paid;
(ii) continued participation in Micco group health plan for such time as may be required under Nova Scotia Labour Standards legislation; and
(iii) only such minimum notice of termination, or pay in lieu thereof, and severance pay (if applicable) to which you are entitled under the Nova Scotia Labour Standards legislation.
In Micco, Counsel for the Applicant employee argued that the termination provision was unenforceable as it was ambiguous and attempted to circumvent statutory obligations, thereby entitling the Applicant to reasonable notice. Counsel for the Respondent employer argued that the clause was enforceable and, through plain language, clearly restricted the Applicant’s entitlements to only his Nova Scotia Labour Standards Code minimums – thus, no further amounts were owing to him following the termination of his employment.
The Decision
Ultimately, Justice Chipman found the language in the termination provision of the employment agreement to be ambiguous, particularly with respect to section (iii).
First, Justice Chipman held that the qualifier “to which you are entitled to under the Nova Scotia Labour Standards legislation” may be interpreted or read in such a way that it did not apply to the notice of termination aspect of the sentence, and instead applied only the severance pay or latter part of the sentence. On this basis, Justice Chipman held that such ambiguity did not clearly limit the Applicant’s amounts to only the minimum notice required in accordance with the Nova Scotia Labour Standards Code, and on such basis, he could not be disentitled from receiving common law reasonable notice.
Second, Justice Chipman held that any reference to “severance pay” – particularly given that there are no entitlements to severance pay outlined anywhere in the Nova Scotia Labour Standards Code – was ambiguous. In the absence of such a statutory entitlement, Justice Chipman held that such a reference to severance pay could thus instead be reasonably construed as referring to common law notice, as reasonable notice is often colloquially referred to as “severance.” In any event, such an alternative interpretation could not serve to disentitle the Applicant from receiving common law reasonable notice.
Based on the foregoing, and in accordance with the principles of contra proferentem, Justice Chipman held that the termination clause was unenforceable due to ambiguity, while adopting the interpretation of the termination provision that was most favourable to the Applicant – an interpretation that did not effectively limit the Applicant’s entitlement to common law reasonable notice.
The Applicant in this case worked for the Respondent for 8.5 years as a Sales Representative. He was terminated without cause at the age of 52. In accordance with the factors outlined in the oft-cited Bardal v Globe & Mail Ltd (1960), 1960 CanLII 294 (ON SC), as well as the Applicant’s characteristics, Justice Chipman awarded the Applicant an 8 month notice period.
In calculating reasonable notice entitlements, Justice Chipman held that the employer’s commission plan did not unambiguously alter or remove the Applicant’s right to receive commissions over the course of the reasonable notice period in accordance with the principles outlined by the Supreme Court of Canada in Matthews v Ocean Nutrition Canada Ltd, 2020 SCC 26. Furthermore, Justice Chipman rejected the Respondent’s claim that the Applicant failed to mitigate his wrongful dismissal damages as his job search had relied primarily on internet-based applications, ruling that the Respondent had failed to discharge their duty to prove that the Applicant could have made additional reasonable efforts to secure re-employment beyond what he had already done.
Takeaways
The language at section (iii) of the employment agreement as above is common language seen in Ontario employment agreements, as employees in Ontario may be entitled to severance pay upon the termination of their employment, which is defined pursuant to the Ontario Employment Standards Act.
The Court in this case emphasized that employment contracts must contain “express language that creates a high level of clarity” to limit an employee’s common law notice entitlement, and, in this case, the termination provision failed to meet such a standard.
While such language poses nothing new for employers here in Ontario, this decision simply reiterates how important it is to have your employment agreements regularly reviewed by counsel to ensure they are up-to-date, to ensure enforceability, and to limit potential amounts owing to an employee upon the termination of their employment.
Furthermore, this decision also stresses the importance of tailoring employment agreements (and termination provisions more specifically) to the specific jurisdiction/province in which an employee is performing work or services, in order to ensure enforceability.
Need More Information?
For more information or assistance with employment agreements and their enforceability, contact Travis Carpenter at tcarpenter@filion.on.ca, or your regular lawyer at the firm.
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