Executive Summary: Key Legal and Evidentiary Issues

• The termination clause in the employment agreement was found to be unenforceable for contravening the Employment Standards Act, 2000 (ESA).

• The clause’s language improperly allowed dismissal without notice or cause during probation, violating statutory minimum standards.

• The employer’s argument that external evidence showed intent to form a probationary relationship was rejected due to the invalid contract provision.

• The court held that even short-term employees are entitled to reasonable notice under common law when termination clauses are void.

• Mr. Chan was not considered a probationary employee and was wrongfully dismissed.

• The court awarded damages for salary, benefits, and exam reimbursement, but denied aggravated or punitive damages due to insufficient evidence of harm or malice.

Facts and background

Reginald Chan was employed by NYX Capital Corp. (later known as Montcrest Asset Management Inc.) starting October 12, 2021, as Vice President – Acquisitions and Asset Management and Chief Compliance Officer. His employment agreement included a three-month probationary period, ending January 11, 2022. He was terminated on January 10, 2022, one day before the probation period ended, and received no notice, pay, or severance.

Chan sued for wrongful dismissal, arguing that the termination clause was unenforceable under the ESA, and that he was entitled to common law reasonable notice. NYX argued he was a probationary employee and was lawfully terminated without notice after a good faith assessment of his unsuitability.

Termination clause invalidity

The court held that the termination clause was void in its entirety. It violated the ESA in multiple ways, including by purporting to allow termination “for any reason” without notice during probation, releasing the employer from all claims except ESA minimums, and allowing for termination “for cause” in a way that failed to meet the ESA's stricter threshold. The court relied heavily on Waksdale v. Swegon and Machtinger v. HOJ Industries to support that when any part of a termination provision offends the ESA, the entire clause is unenforceable.

Probationary status argument rejected

Because the probation clause was invalid, Mr. Chan could not be considered a probationary employee under law. The court emphasized that probationary employment must be established through a valid contractual provision. Even though Chan acknowledged being aware of the probationary period, the court ruled that intention alone, unsupported by an enforceable clause, could not override the statutory and common law requirements. Thus, Chan was entitled to reasonable notice under the common law.

Alternative finding on suitability

The court added that, even if Chan had been a probationary employee, NYX had met the standard for terminating probationary employment by making a good faith determination that he was not suitable for permanent employment. The company had assessed his performance, noted several deficiencies, and had decided on January 7—before Chan raised regulatory concerns—that he should be terminated. The court rejected Chan’s suggestion that his dismissal was retaliatory.

Reasonable notice and damages

Applying the Bardal factors, the court determined that three months of reasonable notice was appropriate. Mr. Chan had a senior mid-level role, was 47 years old, and had over 15 years of industry experience. His short tenure made reemployment more difficult, justifying a longer notice period than the length of employment. He was awarded $43,750 in salary, $159.96 for benefits, and $734.50 for reimbursement of a qualifying exam.

No aggravated or punitive damages

Mr. Chan's claim for aggravated damages failed due to insufficient evidence of emotional distress beyond typical job loss. His claim for punitive damages was also dismissed; while NYX’s conduct was found to be insensitive in its timing and delivery of termination, it was not malicious or high-handed. Therefore, no additional damages were awarded.

Conclusion

The court found that Mr. Chan was wrongfully dismissed due to an invalid termination clause, and awarded him damages reflecting his entitlement to common law notice. His other claims were dismissed due to lack of supporting evidence.