A recent decision from the Nova Scotia Supreme Court, Brocklehurst v. Micco Companies Limited, 2025 NSSC 192, serves as a critical reminder to employers across Canada about the paramount importance of clear and unambiguous language in employment termination clauses. This case, decided on June 11, 2025, highlights how seemingly minor linguistic choices can lead to substantial financial liabilities for employers in wrongful dismissal claims.
Key Facts
- Employee: Craig Brocklehurst, a 52-year-old sales representative with 8.5 years of service.
- Employer: Micco Companies Limited, a group of businesses in the retail, hospitality, and alcohol beverage industries.
- Termination: Brocklehurst was terminated without cause on June 3, 2024, and received statutory minimums for termination pay (four weeks’ pay).
- Employment Agreement: Included a termination clause stating that upon termination without cause, the employee would receive:
- Unpaid salary and accrued vacation pay,
- Continued health benefits as per Nova Scotia Labour Standards, and
- “Only such minimum notice of termination, or pay in lieu thereof, and severance pay (if applicable) to which you are entitled under the Nova Scotia Labour Standards legislation.”
Background of the Case
Craig Brocklehurst, a sales representative, was employed by Micco Companies Limited (Micco) for 8.5 years. His employment terms were outlined in a letter of employment dated January 19, 2016 (the “Agreement”). This Agreement contained express provisions regarding the termination of the employment relationship.
Upon his termination on June 3, 2024, Micco provided Brocklehurst with four weeks’ pay in lieu of notice, aligning with the minimum entitlement under the Nova Scotia Labour Standards Code. They also offered an additional two weeks’ pay if he signed a release, which he declined, choosing instead to pursue a wrongful dismissal claim. At the time of his termination, Brocklehurst’s compensation included a base salary of $36,000, with significantly higher average annual earnings due to commissions.
The Core Dispute: Ambiguity in the Termination Clause
Brocklehurst argued that the termination provision in his employment agreement was ambiguous and, therefore, did not limit his common law notice entitlement. Micco, on the other hand, contended that the clause clearly restricted his right to common law reasonable notice by explicitly referencing “minimum pay-in-lieu of notice required by the Labour Standards legislation.”
Termination Clause at Issue
From the employment agreement:
Termination Without Cause:
Your employment may be terminated by Micco without cause, upon provision to you of the following payments:
(i) any portion of the annual salary and accrued vacation pay, if any, that has been earned by you prior to the date of termination but not yet paid;
(ii) continued participation in Micco group health plan for such time as may be required under Nova Scotia Labour Standards legislation; and
(iii) only such minimum notice of termination, or pay in lieu thereof, and severance pay (if applicable) to which you are entitled under the Nova Scotia Labour Standards legislation.
Court’s Decision
1. Ambiguity in Termination Clause
The court found the termination clause ambiguous for two key reasons:
- “Severance pay” is not defined in Nova Scotia’s Labour Standards Code. The clause could be interpreted in multiple ways, including as a reference to common law entitlements.
- The phrase “to which you are entitled under the Nova Scotia Labour Standards legislation” could be read as applying only to severance pay, not notice.
Since the clause did not expressly state that statutory minimums were the ceiling, it failed to displace common law notice.
2. Common Law Notice Awarded
Given the ambiguity, the court applied common law principles (Bardal factors) and awarded eight months’ notice, significantly more than the statutory minimum.
3. Damages Calculation
The court included base salary, commissions, and benefits in the damages calculation, rejecting Micco’s argument that only base salary should apply.
4. No Failure to Mitigate
The court found that Brocklehurst made reasonable job search efforts and that Micco failed to prove he could have secured employment sooner.
Damages Awarded
The court determined that Brocklehurst was wrongfully dismissed and was entitled to eight months’ common law notice. This was based on the Bardal factors (character of employment, length of service, age of the employee, and availability of similar employment). At the time of termination, Brocklehurst was 52 years old and had nearly 8.5 years of service as a sales representative.
Crucially, the court also ruled that Brocklehurst was entitled to damages for his total compensation during the notice period, which included his base salary, commissions, and benefits (including a car allowance). Micco’s argument to exclude commissions was rejected, as the specific “Sales Incentive Plan” referenced in his initial employment agreement applied only to the 2016 fiscal year and did not unambiguously remove his common law rights for subsequent years. The court calculated his global total compensation at $80,000 per annum and awarded damages of $53,333.33 (less amounts already paid).
Micco’s claim of failure to mitigate by Brocklehurst was also dismissed, as the court found his job search efforts, primarily online and through industry contacts, to be reasonable in today’s digital age.
Why the Clause Failed
- Ambiguity in “Severance Pay”
- Nova Scotia’s Labour Standards Code does not use the term “severance pay.”
- The court ruled that the inclusion of this undefined term created confusion—did it refer to statutory minimums or common law entitlements?
- Unclear Whether “Minimum Notice” Referred Only to Statutory Minimums
- The phrase “to which you are entitled under the Nova Scotia Labour Standards legislation” could be read as modifying only “severance pay” and not the preceding “minimum notice of termination.”
- This ambiguity meant the clause did not clearly exclude common law notice.
- Failure to Explicitly Displace Common Law Rights
- The clause did not state that statutory entitlements were the full and exclusive remedy (e.g., “in lieu of any other notice or compensation at common law”).
- Courts require clear, unequivocal language to override common law entitlements (Bellini v. Ausenco Engineering, 2016 NSSC 237).
Implications for Employers
This decision carries significant weight for employers, particularly those outside of Ontario and federally regulated organizations, where the term “severance pay” is not explicitly defined in provincial employment standards legislation.
Takeaways:
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- Scrutinize Termination Clause Language: Employers must scrutinize and, if necessary, amend their new employment agreements, especially termination clauses, to ensure they are unambiguous and explicitly limit employees’ common law notice entitlements if that is the intention.
- Avoid Ambiguous Terms: The use of terms like “severance pay” can be problematic if they are not clearly defined or if they refer to concepts not explicitly covered by the applicable provincial or territorial labour standards legislation. The court will not assume an employer’s intent if the language is open to multiple interpretations.
- “Statutory Floor to a Ceiling”: In provinces like Nova Scotia, a termination clause must go beyond merely stating that an employee will receive “at least” the statutory minimums. It must clearly communicate that the statutory minimums are the maximum entitlement, effectively converting the “statutory floor to a ceiling.”
- Jurisdictional Differences Matter: “Severance pay” is only a defined statutory entitlement in Ontario and under the Canada Labour Code. Employers in other provinces should avoid using the term unless necessary and ensure compliance with local laws.
- Context Matters: While the Brocklehurst decision originated in Nova Scotia, its reasoning regarding the need for clarity and the potential for ambiguity in termination clauses can serve as a precedent or persuasive authority in other common law jurisdictions across Canada (with the exception of Ontario and federally regulated bodies, which have specific “severance” provisions).
- Review Existing Contracts: Employers should consider undertaking a proactive review of all existing employee contracts. If problematic language, such as the ambiguous use of “severance pay,” is found, they have a couple of options:
- Restate Employment Agreements: Provide employees with new, updated employment agreements, ensuring adequate consideration (e.g., a bonus, promotion, or other benefit) is offered for them to sign the new agreement. This is crucial for enforceability.
- Incorporate into Other Changes: Introduce updated agreements when other employment terms are being changed in the employee’s favour (e.g., a raise, promotion). This can naturally incorporate the required consideration.
- Comprehensive Compensation in Damages: This case reinforces that courts will likely consider all forms of compensation, including commissions and benefits, when calculating damages for wrongful dismissal, unless the employment agreement clearly and legally limits these components during the notice period.
In essence, Brocklehurst v. Micco Companies Limited underscores the judiciary’s commitment to protecting employees’ common law rights in the face of unclear contractual language. Even minor drafting errors (like an undefined term) can invalidate a termination clause, exposing employers to unintended common law liabilities. Regular legal reviews of employment agreements are critical. Employers who fail to draft precise and legally sound termination clauses risk substantial financial penalties in wrongful dismissal lawsuits.
If you need an updated version of your employment agreement, please contact us and we can help!
