Case Comment Volume 35:2

Enforcement of Harsh Termination Provisions in Personal Employment Contracts: The Rebirth of Freedom of Contract in Ontario, The

Table of Contents

The Enforcement of Harsh Termination Provisions in Personal

Employment Contracts: The Rebirth of

Freedom of Contract in Ontario

Brian Etherington*

Can employees look to the courts to ensure fair
employment contracts and reasonable job
security? The author argues that recent deci-
sions of the Ontario Court of Appeal under-
score the fact that courts offer little protection
for the job security of the vast majority of
The recent Ontario Court of Appeal decision
in Machtinger v. HOJ Industries Ltd. contin-
ues, according to the author, the movement
away from a paternalistic interpretation of
harsh termination provisions in personal
employment contracts. In its place the court
has substituted a classical liberal freedom of
contract orientation. The end result of this is to
restrict the implication of a term of reasonable
notice to those situations where there is evi-
dence that the parties intended it.
After summarizing this development, the
author examines the common law origins of
the implied term of reasonable notice and the
relationship of this notion to the idea of free-
dom of contract. He queries the extent to
which the implied term actually reflected a
paternalistic desire on the part of judges to
protect employees. In light of this analysis, the
author asks whether judges ought to be called
upon to undertake such protection. He sug-
gests that the liberal values and status-
consciousness of most judges render them ill-
suited to this task. Given this judicial
predisposition, the author argues that specific
legislative notice requirements for all employ-
ees are preferable to the Ontario Law Reform
Commission’s recommendation that judges be
given increased discretion to set aside uncon-
scionable bargains.

tribunaux peuvent-ils assurer aux
employ6s ]a s6curit6 d’emploi et t’6quit6 dans
leurs contrats de travail? Les r6centes d6ci-
sions de la Cour d’appel de l’Ontario
indiquent, selon I’auteur, que les tribunaux
n’offrent pas, pour la majorit6 des employ6s, la
protection requise. L’auteur soumet que la
d6cision de la Cour d’appel de l’Ontario dans
Machtinger v. HOJ Industries Ltd. s’inscrit
dans la conception lib6rale classique de la
libert6 de contrat qui tend it remplacer, dans le
domaine du droit du travail, l’interpr6tation
paternaliste des clauses de cong6diement abu-
sives. I1 s’ensuit que les parties seront sou-
mises 4 un d61ai raisonnable seulement s’il est
prouv6 qu’elles avaient l’intention d’inclure
un terme A cet effet dans le contrat en question.
Ayant pr6sent6, en r6sum6, ce d6veloppement
jurisprudentiel, l’auteur examine les origines
du “implied term of reasonable notice”, et fait
le rapport entre ce concept du Common Law et
Ia libert6 de contrat. L’auteur se demande si
l’imposition d’un d6lai raisonnable dtait vrai-
ment, pour les employds, une forme de pater-
nalisme, et tente d’6tablir s’il est du ressort des
juges d’accorder une telle protection. I1 soumet
que les juges, avec leurs valeurs lib6rales et
l’importance qu’ils accordent it la hi6rarchie
sociale, ne sont peut-8tre pas les mieux plac6s
pour assumer cette tache. Par cons6quent, l’au-
teur propose qu’au lieu d’adopter les recom-
mendations de la Commission de la r6forme
du droit d’Ontario, et d’accorder aux juges la
discretion de r6silier les contrats 16sionnaires,
le l6gislateur devrait intervenir et stipuler le
pr6avis qui devra 8tre donn6 aux employ6s.

*Associate Professor, Faculty of Law, University of Windsor. The author wishes to thank his col-
leagues Robert Kerr, Jeffrey Berryman and W.A. Bogart for providing comments on drafts of this
McGill Law Journal 1990
Revue de droit de McGill


[Vol. 35


H. Origins and Purposes of the Requirement for Reasonable Notice

Enforcement of Harsh Termination Provisions

Implied at Common Law
III. A Significant Judicial Bent


With its recent decision in Machtinger v. HOJ Industries Ltd.,’ the Ontario
Court of Appeal has capped a remarkably consistent series of decisions reveal-
ing a judicial predisposition to classical liberal notions of freedom of contract
within the employment relationship. This seems contrary to numerous prece-
dents from other jurisdictions and lower Ontario courts in which wrongfully dis-
missed employees were held entitled to reasonable notice at common law
despite harsh contractual termination provisions requiring minimal or no notice
prior to dismissal. Such provisions had, for the most part, been found to be
unenforceable on a number of grounds: unconscionability, inequality of bar-
gaining power, absence of consensus ad idem, changed circumstances removing
the substratum of the contract, narrow construction of the contract against the
employer/drafter, or violation of employment standards legislation.’ Despite

1(1988), 66 O.R. (2d) 545 [herinafter Machtinger].
2Chadburn v. Sinclair Canada Oil Co. (1966), 57 W.W.R. 477 (Alta. S.C.); Allison v. Amoco
Production Co. (1975), 58 D.L.R. 233, [1975] 5 W.W.R. 501 (Alta. S.C.); Nardocchio v. Canadian
Imperial Bank of Commerce (1979), 41 N.S.R. (2d) 26, 76 A.P.R. 26 (S.C.T.D.); Lyonde v.
Canadian Acceptance Corp. (1983), 3 C.C.E.L. 220 (Ont. H.C.); Pickup v. Litton Business
Equipment Ltd. (1983), 3 C.C.E.L. 266 (Ont. Co. Ct.); Collins v. Kappele, Wright & Macleod Ltd.
(1983), 3 C.C.E.L. 228 (Ont. Co. Ct.), grounds aff’d but award var’d (1984), 3 C.C.E.L. 228 (Ont.
C.A.); Dolden v. Clarke Simpkins Ltd. (1983), 3 C.C.E.L. 153 (B.C.S.C.); Doyle v. London Life
Insurance Co. (1985), 23 D.L.R. (4th) 443, 68 B.C.L.R. 285 (C.A.), leave to appeal ref’d (1986),
64 N.R. 318n (sub. nom. London Life Ins. Co v. Doyle); Sawko v. Foseco Canada Ltd. (1987), 15
C.C.E.L. 309 (Ont. Dist. Ct.). See also Jobber v. Addressograph Multigraph of Canada Ltd.
(1980), 10 B.L.R. 278 (Ont. H.C.), rev’d (1983), 1 C.C.E.L. 87 (Ont. C.A.); Wallace v. Toronto
Dominion Bank (1981), 39 O.R. (2d) 350, 81 C.L.L.C. 14,122 (H.C.), rev’d (1983), 41 O.R. (2d)
161, 145 D.L.R. (3d) 431, 83 C.L.L.C. 14,031 (C.A.); Mathewson v. Aiton Power Ltd. (1984), 3



this, the Ontario Court of Appeal, at virtually every opportunity since 1980, has
opted in favour of enforcement of such termination provisions. In Machtinger
it even enforced, as far as was possible, a contractual notice clause that was
rendered null and void by the Employment Standards Act.’

My purposes herein are threefold. First, I will demonstrate the Ontario
Court of Appeal’s progression in recent years towards a classical liberal free-
dom of contract orientation and away from a paternalistic approach to the
enforceability of harsh termination clauses in personal employment contracts.
Second, I will discuss the origins of the development at common law of an
implied term requiring reasonable notice for termination without cause, its rela-
tionship to the development of freedom of contract doctrine in the employment
context, and the extent to which it evidenced judicial paternalism in favour of
the well-being of employees. Third, I will discuss the more important question
of whether courts ought to be called on to develop a more paternalistic approach
under the common law in cases involving the employment relationship and to
interfere on the basis of the absence of substantive fairness in the bargain struck.
This final inquiry questions the competence of our courts to perform such func-
tions and the relative merits of the judiciary and legislatures in confronting
issues of distributive fairness raised by the inherently unequal relations of pro-
duction in our society. In the final analysis, it may be that the basic liberal val-
ues and assumptions concerning freedom of contract held by most of our judges,
as well as their status consciousness when confronting employment termination
issues, render them ill-suited to interfere in employment bargains in a manner
conducive to the protection of employees from the improvident bargains that
result from inequality of bargaining power. Instead what is required is more
overt action in the form of employment standards legislation which dictates
fairer substantive terms of employment security for all employees, including
those who suffer the most from economic inequality but at present find little or
no protection under the common law of wrongful dismissal.


Enforcement of Harsh Termination Provisions

The Ontario Court of Appeal first signalled its predilection for enforcement
of harsh contractual notice provisions in Jobber v. Addressograph Multigraph
of Canada.4 The plaintiff had worked for the defendant for eighteen years,
beginning as a salesperson. By the time of his dismissal he had risen to the sec-
ond highest position in his company (director of sales and marketing for
Canada). With each change of position, including the last one in 1975, he had
signed written employment contracts which were virtually identical. The

C.C.E.L. 69 (Ont. Co. Ct.), rev’d (1985), 8 C.C.E.L. 312 (Ont. C.A.); Aldo Ippolito & Co. v.
Canada Packers Inc. (1984), 29 B.L.R. 167 (Ont. H.C.), rev’d (1986), 14 C.C.E.L. 76 (Ont. C.A.).

3See discussion infra, at notes 23 to 30.
4 Supra, note 2 (C.A.).


[Vol. 35

unchanged termination clause provided for termination without cause, but
promised that in such cases the employer would “give … at least thirty days
advance notice of termination plus any additional notice that may be required
by any applicable legislation … “.5 The trial judge refused to enforce this clause
against the plaintiff and awarded him damages at common law for breach of an
implied term of reasonable notice amounting to eighteen months. He held that
the employer’s failure to adhere to the notice provision at the time of dismissal
made it unenforceable. Alternatively, he construed the clause narrowly as
merely stating a minimum notice period which did not affect the employer’s
common law obligation to provide reasonable notice where such notice would
be greater than the stipulated minimum.’ The Court of Appeal rejected both
arguments and awarded eighty-six days notice, representing thirty days plus the
employment standards requirement of eight weeks for an employee with the
plaintiff’s seniority.

The appellate court chose to ignore precedents which suggest that any
attempt to remove or reduce the term of reasonable notice implied at common
law should be construed narrowly and would require very clear expression of
an intent to do so to be effective.7 In the Court of Appeal’s view, the clause was
“clear and unambiguous” in its statement of the required length of notice for ter-
mination and should be enforced as the parties’ intended estimate of damages
that would flow in the event of dismissal without notice.’ In the absence of evi-
dence of coercion or undue influence of any kind such clauses had to be

The Court of Appeal’s 1983 decision in Wallace v. Toronto-Dominion
Bank”0 received more attention as a declaration of antipathy to the application

5lbid., at 90.
6Supra, note 2 at 282-83 (Ont. H.C.).
7See Chadburn v. Sinclair Canada Oil Co., supra, note 2, where the following language was
found to be ineffective to limit the employer’s common law obligation to provide reasonable

Either party may terminate this contract at any time, with or without cause. In event
of termination employer shall not be liable to employee for wages or salary, except as
may have been earned at the date of such termination.

These words were found insufficient to provide the “clear” and “express” intention necessary
to indicate a contrary intention to the implied requirement for reasonable notice in the absence of
cause (at 480-82).

See also Allison v. Amoco Production Co., supra note 2. There the words “If Company desires
to terminate employment of Employee Company shall give Employee thirty days’ notice thereof”
were not sufficiently clear to displace the doctrine of reasonable notice because “the words used
[did] not clearly state that the contract would terminate on 30 days’ notice but only that if the com-
pany desires to terminate it shall give 30 days’ notice” (at 240).

5Supra, note 2 at 91-92 (C.A.).
lSupra, note 2 (C.A.).



of paternalistic doctrines to relieve against the enforcement of harsh notice pro-
visions in employment contracts.” The plaintiff had commenced employment
with the employer in 1970. After completion of a short probationary period, he
signed a standard form contract of indefinite duration which provided that the
bank could terminate without cause by giving four weeks’ notice or equivalent
payment in lieu thereof. In 1978, after moving through several positions at the
behest of the bank and training for senior management, he was dismissed while
in the position of senior assistant branch manager. The trial judge, noting the
absence of any employee bargaining power to renegotiate the standardized bank
employment contract and the absence of any evidence of discussion of the ter-
mination provisions at the time of hiring, held that the contractual notice clause
was unenforceable because it was an unfair bargain which resulted from ine-
quality of bargaining power.’2 The plaintiff was awarded the equivalent of
twelve months’ salary and benefits as the amount of reasonable notice required
at common law.

At the Court of Appeal, however, this holding was reversed and the con-
tractual notice clause enforced. While the Court pointed to the plaintiff’s failure
to properly plead or present evidence of unconscionability or lack of consensus
ad idem as one basis for its decision, it is incorrect to assert that the decision
centered merely on poor pleading and therefore does not affect the substantive
law.’3 Robins J.A. made it clear that the inequality of bargaining power inherent
in the employment hiring context would not, by itself, be enough to render harsh
notice provisions unenforceable:

Furthermore, apart from any question of pleadings, the meager evidence to
be found with respect to the contract, in my opinion, does not provide the neces-
sary legal basis upon which the contract can be held unenforceable by reason of
unfairness or unconscionability…. Nor can I accept the argument that the bank
document in question is to be dealt with as though it were the kind of standardized


“IM. Macneil, “Case Comment on Wallace v. Toronto-Dominion Bank” (1984) 62 Can. Bar Rev.
12Wallace v. Toronto-Dominion Bank, supra, note 2 (S.C.). Osborne J. relied heavily on Lord
Denning’s controversial statements inLloydsBankLtd v. Bundy, [1975] 1 Q.B. 326 concerning ine-
quality of bargaining power as an apparently broadly applicable basis for paternalistic judicial
oversight of improvident bargains. Because the plaintiff had not originally pleaded unconsciona-
bility, the only evidence relating to the circumstances of entry into the contract were that it was
a standardized form contract, the employee did not recall signing the form or any discussion of it
but admitted it was his signature, and the employer admitted it was not standard practice to give
the employee time to consider the terms of the contract or discuss its provisions or get independent
legal advice. The trial decision reasons appear to implicitly acknowledge that in normal circum-
stances there is enormous inequality of economic power inherent in the employment relationship
and that such inequality in itself can represent a basis for relief against harsh termination provi-
sions, in the absence of positive evidence that the employer brought such provisions and their sig-
nificance to the attention of the employee.
13David Harris implies this in his discussion of the case. D. Harris, Wrongful Dismissal (Toronto:

Richard de Boo, 1984) at 9-12.


[Vol. 35

form agreement in issue before this court in Tilden Rent-A-Car v. Clendenning
(1978), 18 O.R. (2d) 601…. Here, the terms were not hidden in a maze of fine print
but were set forth clearly and understandably; on the evidence, there was no
attempt to take advantage of the plaintiff or to exert influence over him so as to
procure a contract that otherwise would not have been made; and nothing that tran-
spired can be treated as being oppressive of him or as constituting the type of coer-
cion that may vitiate consent.14

Although the majority admitted that the notice clause might have seemed
harsh and unfair at the time of dismissal, they held that the test for unconscio-
nability had to turn on whether the terms were “onerous or blatantly unfair” in
light of the circumstances existing at the time the contract was made. Further,
although the Court stated that there could be imaginable cases where the
employee’s responsibilities and status had escalated so much during employ-
ment that it could be concluded the substratum of the contract entered into at
time of hiring had disappeared, it indicated that such cases would be very lim-
ited and enforceability would therefore be the rule rather than the exception. 5

However, the freedom of contract bent of the majority was not a foregone
conclusion, despite the Jobber decision. While case law from the latter part of
the nineteenth century and the early part of this century “was more prone to
uphold the validity of such a severance provision”, 6 both the trial judge and
Houlden J.A. (in dissent) in Wallace reflected the more modem trend in their
reluctance to enforce the harsh termination clause agreed to on hiring. Both
relied heavily on then-recent jurisprudence from other jurisdictions. These cases
had developed a very paternalistic approach to the interpretation of such clauses
and the determination of whether they represented unconscionable bargains or
were unenforceable under the broader rubric of harsh terms arising from ine-
quality of bargaining power. The courts seemed to be saying that the broadly
applicable notion of inequality of bargaining power introduced by Lord
Denning in Lloyds Bank Ltd. v. Bundy7 in the bank guarantee context could be

4Supra, note 2 at 180 (C.A.).
‘5The majority also indicated that the employer could preclude such changes rendering a harsh
notice provision unenforceable by simply making it clear in personnel manuals or company dec-
larations that the termination provisions remained applicable to employees of any status. Ibid. at
16Harris, supra, note 13 at 9-8, citing Bank of British North America v. Simpson (1874), 24

U.C.C.R 354 and Ellis v. Fruchtman (1912), 3 W.W.R. 558 (Alta C.A.).

17In Lloyds Bank Ltd., Lord Denning held:

There are cases in our books in which the courts will set aside a contract, or a transfer
of property, when the parties have not met on equal terms – when the one is so strong
in bargaining power and the other so weak –
that, as a matter of common fairness,
it is not right that the strong should be allowed to push the weak to the wall.

Other instances of undue pressure are where one party stipulates for an unfair advan-
tage to which the other party has no option but to submit. As where an employer –



transposed generally to the employment hiring context. And they implied an
almost open recognition that the typical employment relationship, particularly
in the hiring context, was characterized by such gross inequality of economic
power as to render employee voluntariness presumptively suspect. Hence the
suggestion in several of these cases, including in Houlden J.A.’s dissent in
Wallace, that in the absence of evidence that the employer drew the employee’s
attention to the termination provisions and explained their potential future sig-
nificance or provided an opportunity for the employee to get independent legal
advice, if such provisions after passage of time appear harsh, they should be
held unenforceable as unconscionable terms or terms lacking the necessary con-
sensus ad idem.5

the stronger party –

has employed a builder –

the weaker party –

to do work for

I would suggest that through all these instances there runs a single thread. They rest
on ‘inequality of bargaining power’. By virtue of it, the English law gives relief to one
who, without independent advice, enters into a contract upon terms which are very
unfair or transfers property for a consideration which is grossly inadequate, when his
bargaining power is grievously impaired by reason of his own needs or desires, or by
his own ignorance or infirmity, coupled with undue influences or pressures brought to
bear on him by or for the benefit of the other. When I use the word ‘undue’ I do not
mean to suggest that the principle depends on proof of any wrongdoing. The one who
stipulates for an unfair advantage may be moved solely by his own self-interest, uncon-
scious of the distress he is bringing to the other.

Supra, note 12 at 336-39.

18Perhaps the most notable decision along these lines, apart from Wallace at trial, is Nardocchio
v. Canadian Imperial Bank of Commerce, supra, note 2. Despite the majority’s attempt to distin-
guish this case in Wallace (supra, note 2 at 177-78 (C.A.)) the fact pattern was remarkably similar.
The plaintiff was hired at an entry level position in 1966 and during the next twelve years rose
through several positions before she was dismissed without cause while an assistant accountant in
1978. The standard form contract signed on hiring contained a far more reasonable termination pro-
vision than that in Wallace in that it provided for a one year probationary period with two weeks’
notice required for dismissal in the first six months and one month’s notice required to terminate
during the last six months of probation. Thereafter the contract required three months’ notice to
be given. The plaintiff was given three months’ notice on dismissal. At trial she testified that she
did not recall signing the hiring contract or receiving any explanation of its terms, although the
employer presented evidence that in normal practice she would have received a fifteen minute
explanation of the contract’s terms. The court held that the termination provisions were not unrea-
sonable at the time of hiring but were unfair and harsh at the time of firing and as such unenforce-
able. It also seemed to suggest that in the absence of evidence from the employer as to the expla-
nation of the terms to the employee it should find there was not consensus ad idem on the notice
provisions. The court’s paternalism caused it to ignore the normal rule that a party which has
signed a written document is taken to have manifested its assent to the contents in the absence of
evidence of fraud, misrepresentation, mistake or non estfactum. Instead, the court seems to have
implied, because of the relative bargaining power of the parties, a requirement that the employer
prove that the significance of the terms was explained to the employee or the employee was sent
to get independent legal advice before signing (at 39-41). As Houlden J.A. pointed out in his dis-
sent, the facts in Wallace were similar in that the plaintiff there also said he did not remember sign-


[Vol. 35

The Court of Appeal’s adherence to a classical liberal contractual paradigm
for the employment relationship, one which viewed the parties as formally equal
and autonomous individuals free to accept or reject the terms of a proposed bar-
gain, was affirmed again in 1985 in Matthewson v. Aiton Power Ltd.” The
plaintiff had commenced employment as a chief estimator with the defendant in
1979. At the time of hiring, the plaintiff was unemployed and, to use the words
of the Court of Appeal, “needed work desperately”.’ Despite raising some con-
cerns about the short notice provided, he signed a contract which stipulated that
the contract could be terminated by either party by giving “not less than two
weeks’ prior notice in writing”. The contract was renewed, with substantial sal-
ary increases, in each of the following three years. Then, in 1982, the plaintiff
was dismissed.

The trial judge held the termination provisions unenforceable on the
grounds of inequality of bargaining power. In his view, the employee’s need for
employment, the absence of any evidence of negotiation of the contract, and the
“take it or leave it” position of the employer with respect to the terms of
employment were sufficient evidence of inequality of bargaining power to
render the clause ineffective.2′ The plaintiff was awarded the equivalent of six
months’ salary as reasonable notice.

The Court of Appeal quickly squelched any chance that the typical hiring
situation, where an employer dictates terms to an employee who has little or no
practical alternative to acceptance, could provide a basis for relief against harsh
terms. Absent evidence of manifest “oppressive or unconscionable acts” on the
part of the employer:

[t]he fact that he was unemployed and needed a job … is not a ground for holding
that there was “inequality of bargaining power” and setting aside the contract on
that ground. 22

Although these decisions can be viewed as manifestations of judicial sup-
port for freedom of contract, they pale in significance when compared to the
Court’s most recent decision in Machtinger v. HOJ Industries Ltd.’ The plain-
tiffs, Lefebvre and Machtinger, had joined the employer in 1978 as car salesper-
sons. Both were dismissed without cause in 1985 and given four weeks’ pay, the
statutory minimum under the Employment Standards Act.24 At the time of dis-

ing the contract or having it explained and the bank said it was not their practice to explain the
terms or to offer an opportunity to obtain legal advice before signing (supra, note 2 at 168, 170

19Supra, note 2 (C.A.).
2Ibid. at 314.
21Supra, note 2 at 71 (Ont. Dist. Co.).
22Supra, note 2 at 314 (C.A.), MacKinnon A.C.J.O.
23Supra, note 1.
24R.S.O. 1980, c. 137, s. 40(1)(c).



missal Lefebvre was sales manager and Machtinger was a salesperson. Both had
signed employment contracts at the time of hiring which had been updated peri-
odically. Throughout the employment relationship the contracts had provided
for termination without cause with two weeks’ notice in the case of Lefebvre
and no notice at all in the case of Machtinger. These termination provisions
were expressly rendered “null and void” by the Employment Standards Act.’
The trial judge, sensing that “null and void” meant what it said (that the provi-
sions were not to be given any effect whatsoever), held that the employees were
entitled to their common law remedy of damages based on the implied period
of reasonable notice. Consequently, Lefebvre was awarded seven and one half
months and Machtinger seven months’notice.

Despite the fact that all precedent supported the trial judge’s decision,26 a
unanimous Court of Appeal held that the “null and void” contract term had to
be given effect to the extent of limiting the employees to the minimum notice
required under the statute. The reasoning of Howland C.J.O. was relatively sim-
ple, if somewhat bizarre given the statutory context.’ He began by acknowledg-
ing that in the case of an indefinite hiring, “where there is no express contractual
legal limitation on the notice to be provided, there is an implied term at common
law that the employee is entitled to reasonable notice of termination.”‘ This
should have been the end of the matter, for surely if the statutory directive to
render the termination clause “null and void” is to be given any significance

251bid., s. 3 provides:

Subject to section 4, no employer, employee, employers’ organization or employees’
organization shall contract out of or waive an employment standard, and any such con-
tracting out of or waiver is null and void.

26See Pickup v. Litton Business Equipment Ltd., supra, note 2 (Ont. Co. Ct) and Collins v.
Kappele Wright & MacLeod Ltd., supra, note 2 (Ont. Co. Ct), appeal allowed to extent of reduction
of notice awarded from ten months to seven months, (1984), 3 C.C.E.L. 228 (Ont. C.A.). The latter
decision was distinguished in Machtinger, supra, note 1 at 551, on the basis that the appeal did
not raise the issue of whether a provision for reasonable notice on termination should be implied
when the contractual provision is null and void due to the Employment Standards Act, Supra, note

27The trial judge, I think correctly, held that his conclusions about the effect of the statutory pro-
vision were supported by the overall statutory context. In addition to the clear prescription of “null
and void” found in s. 3, the lower court ruling was supported by the terms of ss. 4 and 6 of the
Employment Standards Act, supra, note 24. See discussion in reasons of Court of Appeal, supra,
note 1 at 547. Ss. 4 and 6 are as follows;

4 (1) An employment standard shall be deemed a minimum requirement only.

(2) A right, benefit, term or condition of employment under a contract, oral or writ-
ten, express or implied, or under any other Act or any schedule, order or regulation
made thereunder that provides in favour of an employee a higher remuneration in
money, a greater right or benefit or lesser hours of work than the requirement
imposed by an employment standard shall prevail over an employment standard.

6 No civil remedy of an employee against his employer is suspended or affected by this


‘2Supra, note 1 at 548.


[Vol. 35

whatsoever it must mean, at minimum, that there is no express contractual legal
limitation on the notice to be provided. However the Court’s commitment to
freedom of contract was far too strong to be dissuaded by a mere statutory direc-
tive designed to protect employees from the inequalities of the free market.
Howland C.J.O. held that an issue still remained as to whether there was an
implied term of reasonable notice when the employer and employee had
expressly specified the notice to be given, but they specified an amount that was
less than the minimum required by the Employment Standards Act. He then
made reference to several cases which did not concern wrongful dismissal as
support for the principle that whether a term should be implied in a contract
depends on the intention of the parties as evidenced by the words of the agree-
ment and the surrounding circumstances.29 He concluded:

In my opinion, a term should not be implied that a contract of employment could
only be terminated on reasonable notice where the parties have by agreement over
a period of time expressly provided for either no notice or for two weeks’ notice.
While the express termination provisions are null and void under the Employment
Standards Act, there is evidence before the court as to the prior dealings between
the parties and the existence of employment contracts whose terms represented the
agreement of the parties. In those circumstances, a term requiring reasonable
notice should not be implied. The parties never intended that there should have
been a period of seven or seven and one-half months’ notice. 30

In short, he refused to treat the termination provisions as null and void.

However, there are other reasons, apart from the Court’s apparent flouting
of a statutory directive, to be concerned about the Machtinger decision. First,
there is the inference that it is only permissible to imply a term for reasonable
notice in an employment contract when it “is reasonably necessary, having
regard to the surrounding circumstances,”‘” to reflect the intentions of the par-
ties. Certainly it has been argued that the common law rule of entitlement to rea-
sonable notice in the absence of writing to the contrary exists to reflect the par-
ties’ reasonable expectations. However, there is little evidence that this is the
case either in terms of the origins of the reasonable notice requirement or cur-
rent practice. In light of modem day practice, it is probably more accurate to
suggest that the majority of unorganized employees would not even expect rea-
sonable notice prior to dismissal and many would be surprised to learn they are
not employed at the employer’s discretion.32 Perhaps, unorganized employees

from J. Morris, ed., Chitty on Contracts, 25th ed. (London: Sweet & Maxwell, 1983) at 451.

291bid. at 549. Howland CJ.O. relied heavily on some general statements about implied terms
30Ibid. at 549-50.
31Ibid. at 549, citing G.H.L. Fridman, The Law of Contract in Canada, 2d ed. (Toronto:
32K.E. Swinton, “Contract Law and the Employment Relationship: The Proper Forum for
Reform” in B.J. Reiter & J. Swan, eds, Studies in Contract Law (Toronto: Emond Montgomery,
1980) 357 at 363. However, the fact the parties likely neither intend or expect a reasonable notice

Carswell, 1986) at 449.



would have a vague notion that there is statutory protection for a minimal notice
period after a specified duration of employment. However, they would probably
not be aware of additional common law entitlements. Similarly, the criteria
commonly used by the courts to determine the length of reasonable notice in
individual cases do not appear to have much connection with the actual inten-
tions or expectations of the parties at the time of contracting. 33

These factors indicate that the inference of the Machtinger decision –

the requirement of reasonable notice should only be imposed when circumstan-
ces reveal that this accords with the initial expectations of the parties –
is not
consonant with current practice and would significantly undermine the already
limited protection accorded to employees by the current common law of wrong-
ful dismissal.

II. Origins and Purposes of the Requirement for Reasonable Notice

Implied at Common Law

The origins of the common law requirement for reasonable notice in indef-
inite hirings also undermine the Ontario Court of Appeal’s liberal assumptions
about its purpose and function. The Court’s analysis of the implied term as
solely dependent on the parties’ intention at the time of contracting fits well
with the classical liberal paradigm of contract in the employment context which
became popular with the ascendancy of laissez-faire free market economic the-
ories at the end of the eighteenth century and beginning of the nineteenth cen-
tury.3′ According to this view, the courts were to enforce only those terms of the

period is not viewed by Professor Swinton as a reason for ceasing to require it at common law.
In her view, common law rules of contract should exist to serve interests other than the parties
expectations, particularly in the employment context. In her words, the “reasonable expectations”

may not be suitable to all contractual situations, and the courts have refused to enforce
reasonable expectations which fail to comport with competing public policies, such as
restraint of trade, prevention of slavery, contracts against public policy, and unconscio-
nability. In the employment context, they have refused to treat employment for an
indefinite term as at will and have required reasonable notice to terminate.

33The factors most commonly looked to are character of employment or job status, length of ser-
vice with employer, age of employee, availability of similar employment, and perhaps quality of
plaintiff as employee. See Bardal v. The Globe and Mail Ltd. (1960), 24 D.L.R. (2d) 140 at 145,
[19601 O.W.N. 253 (H.C.) and S. McShane, “Reasonable Notice Criteria in Common Law
Wrongful Dismissal Cases” (1983) 38 Ind. Rel. 618.

34See P.S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford: Clarendon Press, 1979),
and S. Jacoby, “The Duration of Indefinite Employment Contracts in the United States and
England: An Historical Analysis” (1982) 5 Comp. Lab. L.J. 85. Atiyah’s work is particularly good
in describing the extent to which the law’s development was influenced by the economic liberalism
of thinkers like Smith and Ricardo. However, I do not wish to imply that there was a sudden and
simplistic transformation of the law of employment brought on by these thinkers and their theories.
As Atiyah explains in some detail, there were many signs of a rising adherence to economic lib-
eralism among prominent lawyers and judges from the sixteenth century onwards. See Atiyah at


[Vol. 35

contract on which the employer and employee, as voluntary individuals, had
agreed. The courts were not to impose the kind of paternalistic obligations
between master and servant which had existed when the relationship had been
one of status.35 Only such obligations as the parties had manifested their inten-
tion to include in their contract should be enforced. The gross disparity in eco-
nomic power between employer and employee which made it possible for
employers to dictate the terms of the bargain was not relevant to the validity or
enforceability of the contract for classical liberal economists like Adam Smith
or Ricardo. Nor was it appropriate for judges in this era of formalism to take
it upon themselves to assess the justice or fairness of the bargain and intervene
on that basis.3
1 Instead the parties were viewed as formally equal in their free-

112-28. One prominent example described by Atiyah was the refusal by the courts during the late
1600’s and early 1700’s to enforce the Statute of Apprentices restrictions on the entrance into and
the practice of a trade in all but the most limited circumstances (at 127-28).
35Jacoby, ibid. at 92-93. This has been described as the transformation of the master and servant
relationship from the familial model to a formalistic freedom of contract model. Under the former
model, the common law had placed several paternalistic obligations on the master including obli-
gations to provide medical care, moral guidance and literacy instruction and pay wages during ill-
ness. Of course the familial model also allowed masters to issue corporal punishment to servants
and imposed numerous moral obligations on the servant (i.e. duties of obedience, loyalty, honesty,
good moral character, etc.) which made it relatively easy for the courts to conclude that the master
had cause for dismissal, particularly given their general predisposition to favour the master’s posi-
tion. Jacoby, ibid. at 88-89. See also Atiyah, ibid. at 522, commenting on the partiality of judges
towards the interests of mill owners dealing with legislation for the protection of workers during
the 1800’s.

36As Atiyah and Horwitz have both pointed out, the growth of formalism fit hand in glove with
the rise of freedom of contract and laissez-faire economic liberalism during the industrial revolu-
tion. Atiyah suggests that the basic tenets of formalism –
that all law is really based on legal doc-
trine and principles derived from precedents, that there is a correct answer for each case, that it
is not for judges to impose policy decisions or weigh the relative justice of competing parties’
claims, and that the judge is to play a purely passive role – were important to the development
of the following pivotal aspects of the growth of freedom of contract doctrine:

First, the idea that it is for the parties to make their own contract, and to select their
own terms, and not for the Courts to interfere in this process. Secondly, the idea that
the effect of a contract once made is, again, not for the Courts to determine in any
active sense. The Court’s function is purely passive and interpretive; the Court must
determine what the contract means, to be sure, but in doing so it is only giving effect
to the intentions of the parties. Thirdly, generally speaking the process of formalism
was combined with a tendency to ‘literalism’, that is, a refusal to read into the contract
anything which the parties had not expressly provided for, and an insistence that impli-
cations could only be made when absolutely necessary to make the contract workable.
Fourthly, formalism meant that the Courts basically disclaimed any power or right to
‘interfere’ in order to achieve a just result…. It was for the parties to choose their own
terms and make their own bargains, and if one chose skillfully while the other chose
foolishly, this was merely the working of the free market system. A fifth identifiable
feature of formalism was the tendency to construe rights in absolute terms. The Courts
were unwilling to examine what motivated a contracting party to act in any particular



dom to choose to enter into the contract and in the voluntariness of their actions.
However, the origins of the implied term of reasonable notice at common law
had little to do with this liberal contractual paradigm. Rather the notion appears
to have arisen in England in part as a holdover from the paternalism of pre-
industrial master and servant law and in part as a necessary rule to ensure that
the courts and the common law were available to employers to prevent and
bring an end to interruptions in production caused by concerted action by

The paternalism of the pre-industrial regulation of the master and servant
relationship by statute and common law was not of a purely benevolent variety.
It is true that the 1563 Statute of Artificers37 required that dismissals for cause
could only be effected legally with approval of two magistrates and provided
that hirings were to be for not less than one year with at least one quarter of a
year’s notice for termination by either party. However, the dominant motiva-
tions for such provisions were the scarcity of labour 8 and the need to minimize
the costs of a parochial system of poor relief. The common law presumption that
an indefinite hiring was a yearly hiring developed over the next two centuries
for the same reasons. The presumption meant that a master who had employed
a servant through the growing or production season had to maintain him for the
rest of the year, thus preventing him from becoming a charge on the parish of
his settlement, the unit responsible for poor relief. It also meant that the servant
who had been kept by the master during the seasons of little employment had
to remain with the master during the production season.39 Later the annual hir-
ing presumption took on added significance when the Settlement Laws were
amended to permit a person to obtain settlement in a given parish by proving
he had been hired to serve and had served for one year in that parish.4″

Atiyah, supra, note 34 at 388-89 and M. Horwitz, “The Rise of Legal Formalism” (1975) 19 Am.
J. of Leg. Hist. 251.

375 Eliz. c. 4, s 5. Cited in Jacoby, supra, note 34 at 88.
38Jacoby points out that the yearly hiring provision was designed to compel labour and restrict
labour competition and movement. Under the Statute of Artificers, a worker who quit before the
end of the year or did not give proper notice could be jailed and lose his entire wages for the period,
while a master who dismissed an employee improperly faced a maximum fine of forty shillings.
Jacoby, supra, note 34 at 90. Note also that the magistrates tended to be predisposed to favour the
master’s position on the issue of cause for dismissal. See supra, note 35.

39Jacoby, ibid. at 86-90. Jacoby concludes (at 90):

[The presumption owed its origins less to equity between servant and master than to
the two foundations of early employment law: the alleviation of the effects of labor
scarcity and the imperatives of a parochial system of poor relief.

403 Wm. and Mary, c. 11, 1691, discussed in Jacoby, supra, note 34 at 90-91. Of course settle-
ment was critical in a poor relief system which determined parish responsibility on the basis of set-
tlement. The presumption of yearly hiring was important in extensive litigation during the eigh-
teenth and nineteenth centuries between parishes over which one was responsible for a pauper’s


[Vol. 35

The English courts of the early nineteenth century extended the presump-
tion of yearly hiring, terminable only by notice, to new urban industrial manual
and non-manual occupations, despite the absence of a labour scarcity or a sea-
sonal employment problem. This extension has been described as peculiar given
the changed labour market and the general new freedom of contract approach
to employment contracts.4′ Nevertheless, it has been explained by several fac-
tors: its importance in widespread poor relief litigation throughout the nine-
teenth century between rural and urban industrial parishes over responsibility
for migrant industrial workers who suffered from the reversal in the labour mar-
ket; the prevalence of long-term fixed contracts in certain branches of industry;
and the utility of long-term contracts in employer efforts to suppress trade union
activity and collective bargaining.42

However, by the middle of the nineteenth century the presumption of
annual hiring was no longer applied to industrial manual occupations and was
beginning to be replaced by a presumption of terminability on reasonable notice
for non-manual workers as well. Its demise in the manual industrial sector was
hastened by the abolition of settlement by hiring and the preference of large
employers for short term hires to provide the kind of dispensable workforce
suitable to their needs in a period of plentiful labour. Unions also urged mem-
bers to seek short-term contracts to prevent prosecutions for breach and to facil-
itate collective bargaining. At its extreme, this led unions to seek “minute con-
tracts” which would allow them to drop their tools and quit on a minute’s notice.
However, most employers did not want employment at will or minute notice
contracts. They usually hired employees on weekly, biweekly or monthly pay
periods and the courts often implied reasonable notice periods which corre-
sponded to the pay period. The notion of at will terminability was not sought
by employers, nor was it implied by courts in the face of silence, because the
requirement for some period of reasonable notice, albeit in most cases a very
short period for industrial workers, was vital in enabling employers to obtain
judicial assistance to stem collective action by workers. Although the Master
and Servant Acts allowed the employer to have workers imprisoned for breach
of contract if they quit without giving proper notice, this tool for prosecuting
strikers would have been lost if the courts had not implied a reasonable notice
requirement into the contract. The judicially implied term of reasonable notice
also allowed union leaders and members to be prosecuted criminally for con-

41Jacoby, ibid. at 95. Jacoby notes that the courts would have been more consistent with their
“new” approach had they tried to determine what the parties intended about duration. However,
the parties’ intention did not lie behind the implied yearly hiring or notice requirements.
42Ibid. at 95-97. As Jacoby explains, until 1875 a master could have his servant imprisoned for
breach of contract, under the various Master and Servant Acts in effect up to that time, if he dis-
obeyed his master by following a union rule or seeking higher wages during the term of the con-
tract. Long-term contracts also made collective bargaining difficult because different workers’ per-
sonal contracts expired at different times.



spiracy to entice breach of contract and to be sued civilly for inducing breach
of contract in the case of planned or actual strikes. Even after the 1875 legisla-
tive abolition of criminal prosecution for breach of contract and other strike
activity, the reasonable notice requirement was still important as the basis for
civil actions against union leaders and striking members.43

The courts clung to the presumption of yearly hiring a little longer for
white collar workers. However, by the end of the nineteenth century they had
replaced it with the presumption of an implied requirement for termination on
reasonable notice. For a time the courts continued to imply yearly hirings but
held them to be defeasible on reasonable notice for lower level white collar
occupations. Even with the final transition to implied indefinite hirings termina-
ble on reasonable notice for all occupations, the courts continued to be quite sta-
tus and class-conscious in their practice of making an employee’s job security,
in the guise of reasonable notice, dependent on occupational status and

In the final analysis, the origins of the implied term of reasonable notice
at common law do not lie in any liberal contractual paradigm nor in an attempt
by the courts acting within that paradigm to determine and enforce the inten-
tions of the parties. Although the transformation from a master-servant to a con-
tractual relationship was influenced by the classical liberal economic theories of
the day and the accompanying movement to freedom of contract and formalism,
implied notice requirements at common law were really the result of poor relief
considerations, labour market circumstances, employer needs for judicial con-
trol of strike activity, and vestiges of paternalism and status-consciousness
among judges. The choice of English courts to opt for a reasonable notice
requirement while American courts opted for an implied at will contract has
been explained as follows:

If there had been a greater variety of tools than just notice periods to suppress
strikes, it is possible that employment at will would have become the norm for

43Ibid. at 98-99. I have relied heavily on Jacoby’s article in my summary of the development

of the implied term of reasonable notice in this paragraph and the next.

44Ibid. at 101. The implication of a reasonable notice period combined greater flexibility for the
employer with a “vestige of the employment security salaried employees had enjoyed under an
annual contract.” Jacoby also views the implied reasonable notice requirement as a creature of the
status-consciousness of English courts, for it allowed them to differentiate between occupations to
give greater employment security to the middle and upper class occupations, something the
American courts forbade themselves when they opted for implied at will terminability during the
last quarter of the nineteenth century. Ibid. at 119-20.

Although some commentators have suggested that the courts are becoming less status-conscious
in determining reasonable notice requirements (Swinton, supra, note 32 at 367), the bulk of the
caselaw still reveals strong evidence of the importance of job status to employment security in the
form of reasonable notice at common law. See McShane, supra, note 33 at 622.


[Vol. 35

English workers. And had English courts been less concerned with status distinc-
tions, the same may have become true of salaried employment. 45

II. A Significant Judicial Bent

Jobber, Wallace, Matthewson, and particularly Machtinger are disturbing
because they reveal the Ontario Court of Appeal’s very strong commitment to
the values and assumptions of the classical liberal paradigm of contract.
According to this paradigm, the employee and employer are viewed as formally
equal in their freedom to accept or reject the terms of the employment contract.
Consequently, the terms are taken as truly indicative of the actual intent of both
parties at the time of hiring and must be enforced by the court as such. Gross
disparity in bargaining power at the time of hiring, even in cases such as
Matthewson, where evidence of the desperate need for employment is led, is not
to be regarded as a basis for judicial interference in the bargain, for this would
hamper the freedom and autonomy of the individuals and the unfettered oper-
ation of the market. When taken to its extreme, as in Machtinger, this view leads
the court to find that a termination provision depriving an employee of any
notice whatsoever must be accepted as revealing the free will and intention of
the employee as well as the employer. Hence, it will be enforced as far as pos-
sible, even where it contravenes the legislated standards for minimum notice on
termination, a violation of employment standards that one might have thought
was a persuasive indication of unequal bargaining power and oppression by the

The cases also reveal continuing strong status or class-consciousness on
the part of judges in their treatment of wrongful dismissal issues generally, and,
more particularly in their enforcement of harsh termination provisions. Both

45Jacoby, supra, note 34 at 102. Jacoby concludes that for manual workers:
Long notice periods did not represent a form of security but were a vestige of servility that could
be used to weaken trade unionism. The manual workers’ security was determined by the strength
of the closed shop in his trade. He did not have to depend on the courts for employment security,
nor were the courts very dependable, as they awarded only very slight damages to a worker dis-
missed without notice.
46A rather peculiar argument often used by the courts in these cases is that fairness or uncons-
cionability has to be determined by what the parties would have thought about the fairness of the
notice provisions as judged at the time of entry into the bargain. For example, there is the simplistic
assertion in Wallace that no one would have found a provision for four weeks notice unreasonable
when the employee is just starting with the employer or during the first year or two of employment,
so the term cannot be judged unfair or unreasonable. But surely this is to ask the wrong question.
For the pertinent question should be whether at the time of hiring a well informed employee would
have regarded a provision limiting him to only four weeks notice should the employer terminate
him after eight or ten or twelve years service with the company as a fair and reasonable provision.
Similarly in Machtinger the relevant question would be whether a person being hired as a car sales-
person would consider a provision entitling the employer to dismiss him without notice after seven
years to be an unfair provision.



Wallace47 and Machtinger s suggest that the only circumstance in which a harsh
termination clause will be held unenforceable on the basis of unconscionability
is where:

an employee’s level of responsibility and corresponding status has escalated so
significantly during his period of employment that it can be concluded that the
substratum of an employment contract entered into at the time of his original hir-
ing has disappeared or it can be implied that the contract could not have been
intended to apply to the position in the company ultimately occupied by him.4 9

What is notable is that it is elevation in job status, and not length of service,
which will win the sympathy of the court. This is, perhaps, understandable
given the importance of status-consciousness on the part of judges in the devel-
opment of the implied requirement for reasonable notice at common law5″ and
the continued significance of job status as one of the most important variables
in contemporary judicial determinations of reasonable notice.5 There has
always been a curious irony to the courts’ greater recognition of the interests of
higher status or upper class callings. Greater protection was provided to those
least in need of it, in terms of their ability and bargaining power to negotiate bet-
ter express contractual terms to protect their job security and their general eco-
nomic capacity to survive the consequences of dismissal. 2 The same irony can

47Supra, note 2 at 180-81 (C.A.).
48Supra, note I at 551.
49Wallace, supra, note 2 at 180-81 (C.A.).
50See discussion supra, note 44 and accompanying text. The courts’ failure to protect the job
security interests of lower status workers (the vast majority of workers) at common law following
the transition of the relationship to one of contract was the primary cause of employment standards
legislation to provide some minimum notice protection. The courts and the common law have tra-
ditionally been a viable and responsive process for only the higher status occupations. Other work-
ers have had to rely on more democratic processes, legislatures and collective action through
unions, to protect their job security interests.

51McShane, supra, note 33 at 622, 627, 629. For a recent example of the importance of job sta-
tus, see Augustine v. Nadrofsky Corp. (1986), 17 O.A.C. 297 (Div. Ct.), where on appeal a shop
helper’s trial award of 4 months notice was reduced to 2 months, in large part because of “the
nature of [his] employment, that of a semi-skilled employee” (at 298).

521 am aware of the putative rationale offered for this preferred treatment on the basis of job sta-
tus. It has been suggested that the principal reasons for longer notice periods for those higher up
on the employment scale are that there are fewer openings for alternate employment at the top of
the scale, persons with higher job status are in positions of greater risk and need greater protection
so they are not discouraged from accepting or continuing in such positions, and finally “a person
holding a job of higher status is a person of higher qualification and entitled to greater reward for
his work.” See Collins v. St. John’s Publishing Co. (1980), 27 Nfld & P.E.I.R. 45 at 56-57, 74
A.P.R. 45 (Nfld S.C.T.D.), quoted in McShane, supra, note 33 at 622. All of these premises are
questionable as rationales for longer notice periods for a long-term executive than a long-term
manual or semi-skilled worker and may depend heavily on changes in job market conditions from
time to time. The last premise concerning people of higher job status being more deserving is not
only revealing of status and class-consciousness in judges but also fails to recognize that gross dis-


[Vol. 35

be noted in the trend in the harsh termination cases to offer the courts’ assist-
ance to those who have risen during the course of employment to senior or high
status positions. These persons are far more likely to enjoy at least some bar-
gaining power, enabling them to renegotiate harsh provisions in their original
contract as they rise through the ranks. Further, they are more likely to have rea-
son to think about the renegotiation of terms in general than employees who
may serve a long time with little change in job status. And they should also be
better situated to handle the economic consequences of dismissal than less
upwardly mobile employees. Status-consciousness appears to be the only expla-
nation that can account for supporting a clause which limits an employee to only
four weeks’ notice after twenty-five years of faithful service in the same posi-
tion, while invalidating the same provision when it applied to an employee with
several years of service (i.e. eight to ten) who had risen from sales person to
senior vice-president. The employee in both cases, if made aware of the conse-
quences, would surely have said the clause was unreasonable and unfair at the
time of hiring.

These significant developments cast doubt on the wisdom of recent sugges-
tions that the courts and the common law can be looked to for better protection
of the employment security interests of unorganized employees. 3 It was the
apparent unwillingness of the courts to adapt the common law to protect the
interests of employees with little bargaining power, and their creative transfor-
mation of the common law to impede employee efforts to take concerted collec-
tive action’, that finally forced legislatures to act to protect employee interests.

parities in rates of pay between low and high status workers will result in much greater rewards
for high job status even if low status workers are given the same length of notice.
53See Swinton, supra, note 32 at 372-77. Swinton has called for the courts to reinterpret the
implied contract for an indefinite duration to exclude the possibility of termination by reasonable
notice. Instead they should imply at common law a term of “termination only for just cause”,
although perhaps adjusting the concept of just cause to include job redundancy or lack of work,
as do the Canada Labour Code provisions for unjust dismissal protection of unorganized employ-
ees (R.S.C. 1970, c. L-1. as am. S.C. 1977-78, c. 27, s. 61.5 (3)(a)). Swinton’s suggestion that the
courts might provide this kind of protection at common law appears totally unrealistic in the face
of decisions like Machtinger where the Court allowed its liberal values and assumptions to under-
mine a statutory directive to disregard a harsh termination provision.

54H.W. Arthurs, “‘The Right to Golf’: Reflections on the Future of Workers, Unions and the Rest
of Us Under the Charter” in Labour Law under the Charter: Proceedings of a Conference
Sponsored by the Industrial Relations Center and Queen’s Faculty of Law (Kingston, Ont.: Queen’s
Law Journal, 1987). Arthurs first makes the point that the courts at common law “virtually never,
not on any given occasion, created a right which might be asserted by or on behalf of working peo-
ple” nor had they generally been willing to “venture to expand the range of rights and remedies
available to anyone else” (at 18-19). Arthurs then continued:

In this record of restrained and limited creativity, there has been one glaring anomaly,
one arena of adjudication where the courts have been singularly inventive. I refer to
the creation of rights and remedies to protect employers against labour and labour
unions. Let me count the ways: (i) the labour injunction and its interim, interlocutory,



Legislatures acted on two fronts: first, they created a statutory framework for
collective bargaining to allow for some degree of equalization of bargaining
power which would hopefully result in fairer terms of employment; second,
they enacted employment standards to provide certain minimum protections for
both organized and unorganized employees in critical areas like job security,
health and safety, workers’ compensation and human rights (non-
discrimination). The common law of wrongful dismissal did continue to
develop in the years following these legislative initiatives. In fact, since the
1960’s, it is commonly viewed as having progressed rapidly in ways favourable
to individual employees as a result of the judiciary’s paternalistic protection of
greater job security in the form of longer notice periods and a wider range of
damages. However, as I have noted, the emphasis on job status ensures that
these improvements in job security have not been significant for the vast major-
ity of employees who are most in need of protection. Although a small number
of employees from the upper echelons of the occupational hierarchy have
gained from these developments, for the multitude outside this select group the
courts remain an expensive forum to enter particularly since the returns granted
by judges are usually too small to make court action a realistic option.” The
result is that the vast majority of employees must continue to rely on collective
bargaining or employment standards legislation to provide protection for their
employment security interests.

Nor does this historical experience and the recent caselaw on enforcement
of harsh termination provisions give employees any hope that the recent Ontario

ex parte and quia timet varieties; (ii) the torts of conspiracy, inducing breach, inten-
tional interference, nuisance and per se illegality; (iii) civil remedies to enforce regu-
latory statutes with their own criminal or administrative remedies; (iv) the proscription
of organizational, secondary, and political pressures in order to either give effect to
labour relations acts or remedy their presumed omissions; and, (v) the restraining of
individuals who are strangers to proceedings, the imposition of civil liability on entities
otherwise unknown to law, and the enforcement of service obligations not enforceable
in other contexts. (at 19)

55The need to provide more meaningful protection for employment security for unorganized
employees than that provided at common law has led several Canadian jurisdictions to enact stat-
utory protections against dismissal without just cause for unorganized workers who meet some
minimum threshold of service time with the employer. These jurisdictions have also created an
inexpensive and accessible administrative mechanism to allow employees a practical process for
the enforcement of these new statutory rights. See Canada Labour Code, R.S.C. 1970, c. L-l, as
am. S.C. 1977-78, c. 27, s. 61.5; Quebec Labour Standards, S.Q. 1979, c. 45, as am., s. 124; and
Nova Scotia Labour Standards Code, S.N.S. 1972, c. 10, as am., s. 67a. These provisions are dis-
cussed in Swinton, supra, note 32 at 373; G. England, “Recent Developments in Wrongful
Dismissal Law and Some Pointers for Reform” (1978) 16 Alta. L. Rev. 470, and “Unjust Dismissal
in the Federal Jurisdiction: The First Three Years” (1982) 12 Man L.J. 9; and R. Litwack, “Firing
May Mean Rehiring: Federal Legislative Changes to the Law Concerning Wrongful Dismissal”
(1986) 20 R.J.T. 55.


[Vol. 35

Law Reform Commission proposal56 –
that judges be given a wide-ranging
mandate to apply a more “clearly” (statutorily) defined general doctrine of
unconscionability to police the fairness of all contracts in the marketplace57 –
will be more successful in protecting their employment security interests.
Without wishing to rehash the long term debate amongst contract academics
about the wisdom of courts taking general jurisdiction to interfere on the basis
of fairness or unconscionability
it is apparent even from a cursory reading of
the recommendations, that the enumeration of the twelve suggested non-
exclusive factors for guidance in determining unconscionability will do little to
increase certainty in the doctrine’s application or to restrain judicial discretion
in terms of which interests will ultimately be protected. As Professor Vaver has
pointed out, the OLRC’s claim that under its recommendations judges will not
be able “to impose their view of public policy on the market place”59 rings

Judges are already imposing these views without unconscionability; why would
they not do so with the doctrine? Moreover, one avowed purpose of the OLRC
Report was to encourage judges to declare openly their views instead of using cov-
ert tools. It is not clear that the Report invites them to change their views; if so,
the invitation is discreetly veiled. In the end, it is likely to be some expressed or
unexpressed judicial ode to individual liberty or to collective responsibility as a

56Ministry of the Attorney-General, Report on the Amendment of the Law of Contract (1987),
c. 6. At 136-37, the Commission recommends the enactment of a doctrine of unconscionability set-
ting out a list of twelve non-exclusive factors which a court might consider to decide whether terms
should be enforced. The doctrine is to be applicable to all contracts but does not indicate any pri-
ority or weighting of the suggested factors, which had been gleaned from Canadian, Australian,
and U.K. statutory precedents.

57For an excellent critical assessment of the recommendations see D. Vaver, “Unconscionability:

Panacea, Analgesic or Loose Can(n)on?” (1988) 14 Can. Bus. L.J. 40.

8For arguments on all sides of the general issue, see articles from the Symposium on
Unconscionability in Contract Law, published in (1979-80) 4 Can. Bus. L.J. 383 et seq. See, in par-
ticular, R. Hasson, “Unconscionability in Contract Law and in the New Sales Act – Confessions
of a Doubting Thomas” (at 383) for arguments against a broad discretionary mandate for judges
to protect and further fairness in contracts under the rubric of unconscionability, and B. Reiter,
“Unconscionability: Is there a Choice? A Reply to Professor Hasson” (at 403) for strong arguments
in favour of judges playing an important role in policing and preserving our institutions for private
ordering to accommodate efficiency and fairness concerns.

However, it is important to recognize that Professors Hasson and Vaver, although critics of judi-
cial supervision under the guise of unconscionability at common law, are not strong supporters of
the free market as a system of private ordering to determine questions of distributive justice. Rather
their concern is with the appropriate institution for the working out and implementation of policy
to deal with questions of distributive justice. Both appear skeptical of the ability and inclination
of courts to develop solutions which are sensitive to the interests of all parties and collective inter-
ests. Further, they point to the undemocratic nature of leaving such questions to the courts. They
are particularly concerned that giving the courts too prominent a role will deflect attention and
responsibility from the democratic process which should be responsible for such issues.

59Supra, note 56 at 127-28.



value to be promoted, rather than a turgid cogitation over unconscionability’s 12
or more factors, that will dictate the result of an individual case. 6
To put this point in more concrete terms, a court which enforces as far as
possible –
a provision
in an indefinite term employment contract which denies any notice of termina-
tion, in contravention of a statutory minimum, is unlikely to find harsh termi-
nation clauses in employment contracts unconscionable under the wide discre-
tion allowed by the OLRC proposals.

as an expression of the employee’s actual intention –


In the final analysis, there are non-judicial avenues workers can follow to
seek enhanced job security. They can organize and seek protection through col-
lective bargaining. They can seek legislative reform on a number of fronts,
including the creation of government supported non-judicial mechanisms for the
pursuit of unjust dismissal claims,6
the enactment of a statutory right to
employment security in the form of a right to dismissal for cause only (or for
cause or redundancy only),62 or the enactment of much longer minimum notice
than are presently guaranteed.63 The lat-
periods – based on years of service –
ter type of legislative change is probably the most viable short-term strategy for
increasing the employment security of those in “lower status” occupational
groups and those least able to protect themselves from the consequences of ine-
quality of bargaining power. Although legislative institutions are fraught with
their own complexities and their inertia is a force to be reckoned with, the like-
lihood of success remains, as in the past, much greater than with the courts.

Canadian, Nova Scotian and Quebec schemes referred to supra, note 55.

6Vaver, supra, note 57 at 66-67.
61Similar mechanisms have been adopted in some Canadian jurisdictions. See discussion of
62See discussion in Swinton, supra, note 32, where argument for such was made primarily in
relation to the possibility of courts implementing it at common law as an implied term in indefinite
employment relationships. Of course this suggestion, as proposed by Swinton, would still enable
employers to contract out of employment security for the worker in most cases, relying simply on
their bargaining power.
63Professor Vaver has also proposed this solution as an example of how we can achieve better
results in our attempts to correct imbalances in the contractual marketplace by focusing legislative
attention on particular problem areas rather than giving broad discretionary mandates to judges. He
proposed that the Ontario legislature amend its employment standards legislation to provide all
employees with at least one month’s notice for every year worked with an employer or associated
corporation: supra, note 57 at 72.