Thomas Perry

Barrister and Solicitor

Thomas Perry is an employment and labour lawyer in Toronto, Ontario. He has experience with management-side employment and labour issues, and providing strategic HR advice to businesses.

He can be reached at thomasperry88@gmail.com

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Summary and Analysis of Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199

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This decision from the Ontario Court of Appeal addresses the interpretation of a settlement agreement and release signed by an employee, Matthew Preston, following his termination from Cervus Equipment Corporation. The central issue was whether the settlement documents released Preston’s claim for vested stock units under the company’s Deferred Share Plan. The motion judge had ruled in favor of Preston, finding that the settlement did not cover the vested stock units. The Court of Appeal reversed this decision, holding that the clear and broad language of the release included the vested stock units.

Key Facts

  1. Background:
    • Matthew Preston was employed by Cervus Equipment Corporation from 2014 to 2018. As part of his compensation, he participated in the company’s Deferred Share Plan, which allowed him to purchase stock units that vested immediately, with matching units from Cervus vesting over three years.
    • Upon termination without cause in January 2018, Preston had 4,964.04 vested stock units (valued at $75,949.81) and 4,499 unvested units. The unvested units were forfeited, but the vested units were automatically redeemable under the Plan.
  2. Wrongful Dismissal Action and Settlement:
    • Preston sued for wrongful dismissal, seeking damages for reasonable notice and bonus entitlements. He did not initially claim the vested stock units.
    • The parties settled the wrongful dismissal action for $100,557.12. The settlement documents included a broad release of all claims related to Preston’s employment, including claims for stock options, share awards, and other incentives.
  3. Dispute Over Vested Stock Units:
    • After signing the settlement, Preston sought payment for his vested stock units. Cervus refused, arguing that the release covered these units.
    • Preston then sued for the value of the vested stock units, and both parties brought summary judgment motions.
  4. Motion Judge’s Decision:
    • The motion judge ruled in favor of Preston, finding that the settlement did not release his claim for the vested stock units. The judge reasoned that the units were automatically redeemed upon termination and were not part of the wrongful dismissal action. He also noted that it would make little economic sense for Preston to give up the 75,949.81investedunitsforasettlementof75,949.81investedunitsforasettlementof100,557.12.

Court of Appeal’s Analysis and Decision

  1. Standard of Review:
    • The Court of Appeal applied the standard of correctness to the motion judge’s interpretation of the settlement documents, as this involved a question of law.
  2. Principles of Contractual Interpretation:
    • The court relied on Corner Brook (City) v. Bailey, 2021 SCC 29, which held that releases are contracts and must be interpreted according to the ordinary rules of contractual interpretation. The goal is to ascertain the parties’ objective intentions at the time of signing, considering the factual matrix but without allowing the surrounding circumstances to overwhelm the clear language of the agreement.
  3. Clear and Broad Language of the Release:
    • The settlement documents contained broad language releasing Cervus from “all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, claims and demands whatsoever” related to Preston’s employment or its termination.
    • Specifically, the release stated that Preston had “no entitlement under or from, or any claim of any nature or kind against the Releasees in respect of, any bonus, share award, stock option, deferred share or similar incentive plan offered by or on behalf of the Releasees.”
  4. Motion Judge’s Errors:
    • The Court of Appeal found that the motion judge made three errors:
      • He allowed the factual matrix to overwhelm the clear language of the release, effectively rewriting the contract.
      • He misapplied the principle from Corner Brook that broad releases may be narrowly construed. The language in this case was specific and unambiguous.
      • He improperly considered the economic benefits of the settlement, which is not the role of a judge interpreting a contract.
  5. Finality of Settlement Agreements:
    • The court emphasized that settlement agreements are intended to bring finality to disputes. The broad and specific language of the release clearly included the vested stock units, and Preston, with the benefit of legal advice, had signed the agreement.

Disposition

The Court of Appeal allowed Cervus’s appeal, set aside the motion judge’s judgment, and dismissed Preston’s claim for the vested stock units. The court awarded Cervus $5,000 in costs for the appeal and left open the possibility of further submissions on costs for the proceeding below.

Impact on Employers

  1. Importance of Clear and Comprehensive Releases:
    • This decision underscores the importance of drafting clear and comprehensive release language in settlement agreements. Employers should ensure that releases explicitly cover all potential claims, including those related to stock options, bonuses, and other incentives.
    • The broad language in this case (“any and all entitlements whatsoever”) was critical to the court’s decision. Employers should use similarly inclusive language to avoid ambiguity.
  2. Finality of Settlements:
    • The decision reinforces the principle that settlement agreements are intended to bring finality to disputes. Once a release is signed, employees generally cannot pursue additional claims, even for entitlements not explicitly mentioned in the settlement negotiations.
    • Employers should ensure that employees receive independent legal advice before signing releases to minimize the risk of future disputes.
  3. Economic Considerations Are Irrelevant:
    • The court rejected the motion judge’s consideration of whether the settlement made economic sense for Preston. Employers should not rely on courts to consider the fairness of a settlement when interpreting a release. The focus is on the language of the agreement, not the parties’ subjective intentions or the economic outcome.
  4. Risk of Overlooking Specific Entitlements:
    • Employees and their legal advisors must carefully review settlement agreements to ensure they understand what claims are being released. In this case, Preston’s failure to explicitly exclude the vested stock units from the release cost him a significant entitlement.
    • Employers should be prepared to address specific employee concerns about entitlements during settlement negotiations to avoid misunderstandings.
  5. Legal Advice for Employees:
    • The court noted that Preston had received independent legal advice before signing the release. Employers should encourage employees to seek legal advice to ensure the enforceability of the settlement and reduce the risk of future litigation.

Conclusion

This decision highlights the importance of clear and comprehensive language in settlement agreements and releases. Employers must ensure that releases explicitly cover all potential claims, including stock options, bonuses, and other incentives, to avoid future disputes. The case also reinforces the principle that settlement agreements are intended to bring finality to disputes, and courts will enforce the clear language of the agreement, regardless of the economic outcome for the parties. Employers should take care to draft releases that are unambiguous and inclusive, while employees should carefully review settlement agreements to understand what claims they are releasing.

write a summary and analysis of the folowing decision with a focus on the impact for employers Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199 (CanLII) Document History (0) Cited documents (4) Treatment (2) CanLII Connects (2) Date: 2024-03-19 File number: COA-23-CV-0859 Citation: Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199 (CanLII), <https://canlii.ca/t/k3jsq&gt;, retrieved on 2025-03-15 Browse myCanLII Save this case Set up citation alert Share this case COURT OF APPEAL FOR ONTARIO CITATION: Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199 DATE: 20240319 DOCKET: COA-23-CV-0859 Lauwers, Roberts and Monahan, JJ.A. BETWEEN Kim Kopyl Applicant (Respondent) and Losani Homes (1998) Ltd. Respondent (Appellant) Jonathan L. Dye, for the appellant Alex Van Kralingen and Vibhu Gairola, for the respondent Heard: March 13, 2024 On appeal from the order of Justice R.J. Harper of the Superior Court of Justice, dated June 21, 2023. REASONS FOR DECISION [1] The appellant hired the respondent on a one-year fixed term contract from July 6, 2022, to July 6, 2023, (the “Term”) at an annual salary of $150,000. The employment agreement included both for-cause and without-cause termination clauses (collectively, the “Termination Clauses”). [2] On January 9, 2023, the appellant purported to terminate the respondent’s employment on a without-cause basis and paid her four weeks salary, equal to $11,538.46. [3] The respondent argued that the Termination Clauses in the contract were void on the basis that they contravened requirements set out in the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). Therefore, the respondent claimed that the appellant did not have the right to terminate her employment prior to the expiry of the Term and that she was entitled to be paid her salary for the Term’s unexpired portion, without a duty to mitigate her damages.[1] [4] The appellant did not dispute the fact that the Termination Clauses contravened the ESA and were therefore void. However, relying upon this court’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, the appellant argued that, where one termination clause in an employment contract contravenes the ESA, all the termination clauses in the contract are automatically voided. The appellant further argued that the clause establishing a one-year limit to the respondent’s employment (the “Fixed Term Clause”) was in effect a termination clause. Thus, because the Termination Clauses in the contract were void, so too was the Fixed Term Clause. The legal consequence was that the respondent’s employment was not subject to a fixed term but, rather, was terminable upon the provision of “reasonable notice” at common law, subject to a duty on the respondent to mitigate her damages. The appellant maintained that the four-week salary that had been paid to the respondent more than satisfied its obligations upon termination. [5] The application judge rejected the appellant’s position and found that the invalidity of the Termination Clauses did not affect the validity of the Fixed Term Clause. Relying on this court’s decision in Howard v. Benson Group Inc., 2016 ONCA 256, 129 O.R. (3d) 677, at para. 21, the application judge found that a contractual provision providing for a fixed term of employment was not a termination clause since, upon the expiry of said fixed term, the employment relationship automatically terminates without any obligation on the employer to provide notice or payment in lieu of notice. Therefore, despite the invalidity of the Termination Clauses, the Fixed Term Clause remained in effect. The legal consequence was that the respondent’s employment had been wrongfully terminated and she was entitled to receive payment equal to her salary and benefits for the unexpired portion of the Term, less any amounts paid by the appellant, without any duty to mitigate. [6] On appeal, the appellant argues that the application judge failed to properly apply Waksdale, that the invalidity of the Termination Clauses should have voided the Fixed Term Clause, and that the respondent was entitled only to the provision of reasonable notice, rather than compensation for the unexpired portion of the Term. [7] We do not agree. Although the application judge’s decision is reviewable on a correctness standard,[2] the application judge made no error in finding this court’s decision in Benson Group Inc. to be dispositive of the application. [8] In Benson Group Inc., the invalidity of a clause providing for early termination of the employment agreement on a without cause basis did not alter the legal effect of the provision fixing the term of the contract. Because there was no enforceable provision providing for early termination without cause, the employee was entitled to receive the compensation they would have earned to the end of the term, without any duty to mitigate. [9] Waksdale, which did not involve a fixed-term employment agreement, involved entirely different circumstances and has no application to this case. Waksdale merely held that the invalidity of a particular termination clause in an employment contract voided other termination provisions in the agreement, with the result that the employee was entitled to reasonable notice upon termination of their employment. Waksdale made no reference to Benson Group Inc., nor did it suggest that the invalidity of the termination clause in an employment contract had the effect of converting a fixed term contract into one terminable on reasonable notice. [10] The appeal is therefore dismissed. The respondent, as the successful party, seeks costs of the appeal on a partial indemnity basis of $7,729.20. The appellant, which did not submit its own cost outline, estimated that its costs likely did not exceed $5,000, and argues that the respondent should be awarded $3,750. [11] The costs incurred by the respondent were reasonable and in an amount that ought to have been in the contemplation of the appellant. We fix the costs of the appeal payable by the appellant to the respondent to be $7,500, on an all inclusive basis. “P. Lauwers J.A.” “L.B. Roberts J.A.” “P.J. Monahan J.A.”

Summary and Analysis of Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199

This decision from the Ontario Court of Appeal addresses the enforceability of a fixed-term employment contract and the impact of invalid termination clauses on such contracts. The court upheld the application judge’s decision that the invalidity of the termination clauses did not affect the validity of the fixed-term clause, meaning the employer was liable for the full unexpired portion of the fixed term. This decision has significant implications for employers, particularly those using fixed-term contracts and termination clauses.

Key Facts

  1. Background:
    • Kim Kopyl was hired by Losani Homes on a one-year fixed-term contract from July 6, 2022, to July 6, 2023, with an annual salary of $150,000.
    • The employment agreement included both “for cause” and “without cause” termination clauses.
  2. Termination:
    • On January 9, 2023, Losani Homes terminated Kopyl’s employment on a without-cause basis and paid her four weeks’ salary ($11,538.46) in lieu of notice.
    • Kopyl argued that the termination clauses were void because they contravened the Employment Standards Act, 2000 (ESA). She claimed she was entitled to her salary for the unexpired portion of the fixed term, without any duty to mitigate her damages.
  3. Application Judge’s Decision:
    • The application judge found that the termination clauses were void for non-compliance with the ESA but held that the fixed-term clause remained valid. As a result, Kopyl was entitled to her salary and benefits for the unexpired portion of the term, less the amount already paid by Losani Homes.
  4. Appeal:
    • Losani Homes appealed, arguing that the invalidity of the termination clauses should also void the fixed-term clause, converting the contract into one terminable on reasonable notice at common law. The employer relied on Waksdale v. Swegon North America Inc., 2020 ONCA 391, which held that the invalidity of one termination clause voids all termination clauses in an employment contract.

Court of Appeal’s Analysis and Decision

  1. Standard of Review:
    • The court applied the correctness standard to the application judge’s interpretation of the employment contract.
  2. Validity of the Fixed-Term Clause:
    • The court upheld the application judge’s decision, relying on Howard v. Benson Group Inc., 2016 ONCA 256, which held that a fixed-term clause is distinct from a termination clause. A fixed-term clause automatically ends the employment relationship at the end of the term without requiring notice or payment in lieu of notice.
    • The invalidity of the termination clauses did not affect the fixed-term clause, as the two serve different purposes. The fixed-term clause was not a termination clause and therefore was not voided by the non-compliance of the termination clauses with the ESA.
  3. Distinction from Waksdale:
    • The court distinguished this case from Waksdale, which involved the invalidity of termination clauses in an indefinite-term employment contract. Waksdale did not address fixed-term contracts and did not suggest that the invalidity of termination clauses would convert a fixed-term contract into one terminable on reasonable notice.
  4. Employer’s Liability:
    • Because the fixed-term clause remained valid, Kopyl was entitled to her salary and benefits for the unexpired portion of the term, without any duty to mitigate her damages. The employer’s liability was not limited to reasonable notice at common law.

Impact on Employers

  1. Fixed-Term Contracts vs. Indefinite-Term Contracts:
    • This decision reinforces the distinction between fixed-term and indefinite-term employment contracts. Employers must understand that fixed-term contracts create an obligation to pay the employee for the entire term unless there is a valid early termination clause.
    • If a fixed-term contract lacks a valid termination clause, the employer cannot terminate the employee early without being liable for the full unexpired portion of the term.
  2. Drafting Termination Clauses:
    • Employers must ensure that termination clauses in fixed-term contracts comply with the ESA. If a termination clause is found to be invalid, it will not automatically void the fixed-term clause, but it will leave the employer without the ability to terminate the employee early without significant liability.
    • Employers should carefully draft termination clauses to explicitly comply with the ESA’s minimum standards, including notice, severance, and continuation of benefits.
  3. Risk of Invalid Termination Clauses:
    • The invalidity of termination clauses in a fixed-term contract does not convert the contract into an indefinite-term contract. Instead, the employer remains bound by the fixed term and is liable for the full unexpired portion if the employee is terminated early.
    • Employers should avoid relying on Waksdale to argue that invalid termination clauses void the entire contract, as this case confirms that fixed-term clauses are treated differently.
  4. Cost of Early Termination:
    • Employers using fixed-term contracts must be aware of the financial risks of early termination. If the contract does not include a valid termination clause, the employer may be required to pay the employee for the entire term, regardless of when the employment ends.
    • This decision highlights the importance of ensuring that fixed-term contracts are drafted with clear and enforceable termination provisions.
  5. Mitigation of Damages:
    • In fixed-term contracts, employees are generally not required to mitigate their damages if the employer terminates the contract early. This means the employer must pay the full amount owed for the unexpired term, even if the employee finds new employment quickly.
    • Employers should consider this when deciding whether to use fixed-term contracts and how to structure termination provisions.

Conclusion

The Kopyl v. Losani Homes decision underscores the importance of carefully drafting fixed-term employment contracts and termination clauses. Employers must ensure that termination clauses comply with the ESA to avoid significant liability for early termination. The decision also clarifies that the invalidity of termination clauses does not affect the validity of fixed-term clauses, meaning employers remain bound by the fixed term unless they include a valid early termination provision. Employers should review their employment contracts to ensure compliance with the ESA and mitigate the risks associated with fixed-term agreements.