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What Is a Termination Clause in Alberta?
A termination clause is a part of an employment contract designed to provide “certainty” for the employer. Its primary goal is to limit the amount of money a company has to pay you when the relationship ends.
Without a written clause, you are generally entitled to “reasonable notice” under common law. A termination clause attempts to replace that generous common law right with a specific, usually much smaller, formula.
Are Termination Clauses Enforceable in Alberta?
Not always. In fact, many termination clauses in Alberta are legally invalid. For a clause to be upheld in court, it must follow strict rules:
- No Minimum Violations: It cannot provide less than the minimum notice or pay required by the Alberta Employment Standards Code (ESC). Even if it might provide less in the future, it could be struck down now.
- Clarity is Key: If the language is vague or “ambiguous,” Alberta judges will typically rule in favor of the employee and throw the clause out.
- Proper Format: It must cover all aspects of compensation, including benefits, bonuses, and commissions that would have been earned during the notice period.
If a judge decides your termination clause is unenforceable, it is treated as if it doesn’t exist. You then move from the “minimum” pay to full common law severance.
Statutory Minimums vs. Common Law
There is a massive financial difference between these two categories:
- Statutory Minimums: Based on the ESC, providing between 1 and 8 weeks of pay depending on your length of service.
- Common Law: Based on your age, position, and years of service. This can result in up to 24 months of pay.
Employers use termination clauses specifically to prevent you from accessing that 24-month maximum. If you’ve been let go, don’t assume the amount listed in your contract is all you are owed.
The “Severance Cap” Trap
Many Alberta contracts include a “cap” that says an employee can never receive more than a certain amount of notice (e.g., “capped at 8 weeks”). If you are a long-term employee or a senior manager, this cap could cost you tens of thousands of dollars.
Before you accept a severance offer based on a capped clause, have it reviewed. If the clause was signed under pressure or contains legal errors, that cap may be void.
Signing a New Contract Mid-Employment
If you have been working for a company for years and they suddenly ask you to sign a new contract containing a restrictive termination clause, be very careful.
- The “Consideration” Rule: For a new contract to be valid in Alberta, the employer must give you something new in return (like a raise, a promotion, or a signing bonus).
- The “Sign or be Fired” Threat: If you are told you will be fired if you don’t sign a new contract that limits your severance, you may have a claim for constructive dismissal.
Termination Clauses in Other Contract Types
Termination clauses interact differently with other specific contract terms:
- Fixed-Term Contracts: If a fixed-term contract is ended early and there is no valid termination clause, the employer may owe you the entire remaining balance of the contract.
- Probation Periods: Most contracts include a clause stating no notice is required during the first 90 days.
- Post-Employment Rules: A termination clause often lives alongside non-solicitation and non-compete clauses which restrict your future work.
Don’t Leave Your Severance to Chance
A single sentence in your employment contract can be the difference between a few weeks of pay and two years of financial security. If you’ve been fired, or if you’re being asked to sign a new agreement, let our experts verify your rights.
The Alberta employment law team at Samfiru Tumarkin LLP can review the termination clause in your agreement and get the severance pay you are legally owed.