The Ontario case Giacomodonato v. Peartree Securities, 2023 ONSC 3197 (“Donato“) offers valuable lessons for employers on managing post-termination matters, enforcing employment agreements, and handling restrictive covenants. For employers navigating these issues, consulting a Toronto employment lawyer or employment contract lawyer is crucial to ensure compliance and reduce legal risk.
This case was an important precedent we recently used in a wrongful dismissal case involving a large employer’s inappropriate conduct toward a client who was dismissed from her employment, including intimidatory conduct of initiating a counterclaim as a result to our client’s efforts to negotiate her severance package.
Why Post-Termination Planning Matters
When an employee leaves (or is dismissed) without proper planning, the consequences can be significant. In Donato, the company terminated its President and Co-Head of Banking without cause. The employee subsequently filed a wrongful dismissal claim, while the company counterclaimed, alleging breach of restrictive covenants, fiduciary duties, and unjust enrichment.
The case highlights the dual risks employers face: potential claims for wrongful dismissal and challenges enforcing post-employment restrictions. Consulting a severance package lawyer Toronto early can help employers structure agreements to minimize these risks.
Employment Contracts: More Than Just a Signature
A major question in Donato was whether the employment contracts were enforceable. Two agreements were at issue:
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Initial Offer Letter (April 2016) – The company argued this was a preliminary, non-binding document. The Court disagreed, noting that it included all necessary contractual elements: offer, acceptance, and consideration.
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Second Employment Contract (July 2016) – This updated contract outlined termination entitlements. The employee questioned whether there was sufficient consideration (i.e., value exchanged). The Court ruled that additional vacation time and a $40,000 benefit clearly met the standard.
Even if fresh consideration were missing, the contract could still be binding based on precedent. When an employer fundamentally changes employment terms, the employee can:
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Accept the new terms
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Reject them and pursue damages
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Continue under the new terms while explicitly rejecting them
In Donato, the employee signed the second contract without protest, effectively agreeing to its terms. For employers, this underscores the importance of negotiating contracts carefully and documenting acceptance.
Drafting Effective Termination Clauses
The enforceability of termination provisions is another critical area. The employee claimed the second contract’s termination clause was invalid because it did not specifically mention accrued vacation pay.
The Court rejected this claim, holding that silence on accrued vacation or wages did not deny the employee statutory entitlements. This case highlights the importance of clear termination clauses and understanding statutory requirements in Ontario. Employers should consult a Toronto employment lawyer or employment contract lawyer to ensure termination provisions are enforceable and compliant with employment standards.
When Punitive Damages Apply
Punitive damages in employment cases are rare, typically reserved for situations involving egregious or malicious employer conduct.
In Donato, the Court awarded $10,000 in punitive damages because the employer:
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Delayed payment of contractual entitlements after termination
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Demanded the employee sign a compliance certificate not required under the contract
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Tried to impose unilateral conditions on severance payments
While the company’s counterclaims were not deemed abusive litigation, failing to respect contractual obligations triggered the punitive award. This serves as a warning: neglecting post-termination duties can lead to penalties, even when the dismissal itself is lawful. A severance package lawyer Toronto can help ensure all contractual obligations are fulfilled.
Restrictive Covenants: Don’t Overreach
The company’s counterclaim, which relied on restrictive covenants, failed. The Court found:
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Non-competition clauses were unenforceable because the employer had no proprietary interest in the restricted activities, and the scope (24 months) was unreasonably broad.
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Non-solicitation clauses were invalid due to ambiguous terms, lack of temporal limits, and overlap with non-competition restrictions.
Key takeaway: restrictive covenants must be narrowly tailored to protect genuine business interests. Overly broad clauses are likely to be struck down. Employers should work with a Toronto employment lawyer to draft enforceable covenants that balance protection with legal enforceability.
Practical Takeaways for Employers
The Donato decision offers several actionable lessons:
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Initial employment letters can be binding – Even preliminary offers may create enforceable contracts.
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Negotiate carefully – For executives and other senior employees, ensure all contracts and amendments are clear and supported by consideration.
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Restrictive covenants must be precise – Protect only legitimate proprietary interests and avoid overbroad terms.
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Fulfill contractual and statutory obligations – Failure to pay owed salaries, vacation, or severance can result in punitive damages.
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Avoid unreasonable legal tactics – Pursuing meritless claims or counterclaims can lead to adverse cost awards.
By keeping these points in mind, employers can reduce litigation risks, maintain good business practices, and protect their interests after an employee departs.
How Legal Professionals Can Help
Ontario employment law is complex, especially regarding post-termination obligations and restrictive covenants. Engaging the right legal counsel can help employers:
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Draft enforceable employment contracts and restrictive covenants
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Ensure statutory and contractual termination obligations are met
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Manage and defend against wrongful dismissal claims
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Mitigate the risk of punitive damages or adverse cost awards
Similarly, employees seeking to protect their rights after termination can benefit from consulting a wrongful dismissal lawyer to pursue claims or evaluate severance entitlements.
Conclusion
The Donato decision underscores the importance of:
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Carefully drafted employment agreements
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Narrow, enforceable restrictive covenants
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Respecting statutory and contractual obligations post-termination
Employers who neglect these areas risk costly litigation, punitive damages, and unenforceable contract provisions. By proactively working with a Toronto employment lawyer, employment contract lawyer, severance package lawyer Toronto, or wrongful dismissal lawyer, employers can better navigate complex post-termination situations and protect their business interests.
Call Toronto Employment Lawyer Now
It is important for an employee (or an employee) to obtain a legal consultation before taking any action that could affect their situation at workplace. Sezar has experience advocating for both employers and employees, which allows him to anticipate the other side’s arguments and develop an effective strategy, including termination of employment.
If you are looking for a wrongful dismissal lawyer in Toronto, call us today at 647-822-5492 for a case evaluation with an experienced employment lawyer.
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