Termination Clause in Alberta: What Employees Need to Know

Getting a new job can be an exciting and sometimes overwhelming time. Many new employees simply sign on the dotted line and are ready to jump in. However, many employment agreements contain language which can be quite limiting on an employee’s rights, such as strict termination clauses, non-compete, or non-solicitation clauses.

The Importance of the Termination Clause

Termination clauses are often overlooked by employees when signing a new contract, as contemplating the end of the employment relationship seems silly when the ink on the new contract is barely dry. However, these clauses have the potential to significantly limit severance entitlements upon termination, and employees should have a good understanding of what this means for them before signing.

In Alberta, an employer cannot contract out of the minimum amount of termination notice (or pay in lieu of notice) that is owed to an employee under the Alberta Employment Standards Code. However, a well-drafted termination clause can contract out of, or severely limit, the employer’s obligation to provide further notice or pay in lieu of notice (severance pay) pursuant to the common law (court cases).

Many termination clauses are poorly drafted and are generally unenforceable. However, a well-crafted termination clause may be successful in limiting an employee to the minimum termination notice under the Code, and nothing more. This means that the employee would be entitled to significantly less than what would be awarded by a court. The employee would also be barred from bringing a wrongful dismissal claim against the employer for further severance.

Peace of Mind

Having your employment agreement reviewed by a Lawyer before signing, can provide peace of mind, and help prevent any nasty surprises down the line. A lawyer can help you understand any potential risks or impacts arising from the language in the contract, and can also negotiate more favourable terms on your behalf, such as a more generous severance entitlement, or a shorter non-compete/non-solicit period.