By Stephen Dugandzic
In Singh v Clark Builders, 2025 ABKB 3, the Alberta Court of King’s Bench upheld a termination clause in an employment contract, limiting the employee’s notice entitlement to 90 days, despite the employee’s promotion from Vice President to Chief Operating Officer (COO), and despite the employer’s allegation of just cause.
Background:
Mr. Singh, a seasoned executive, was recruited by Clark Builders after nearly a year of negotiations. He signed an Offer of Employment and a separate contract, both of which he personally negotiated. The termination clause, which Mr. Singh proposed and the company accepted, specified a 90-day notice period for termination without cause, replacing the company’s standard provision that limited employees to Employment Standards Code minimums.
Key Issues and Court Findings:
1. Enforceability of the Termination Clause:
Mr. Singh argued that the termination clause was ambiguous and should be interpreted in his favor. The Court disagreed, finding the clause clear and unambiguous in limiting Mr. Singh’s entitlement to 90 days’ notice or pay in lieu thereof. The Court highlighted Mr. Singh’s experience as a seasoned executive with substantial bargaining power and a strong grasp of contract terms, noting that he had personally modified the company’s standard form contract during negotiations.
2. Changed Substratum Doctrine:
Mr. Singh contended that his promotion to COO and the evolution of his role invalidated the original termination clause under the changed substratum doctrine. The Court found that Mr. Singh’s promotion and changes in responsibilities were contemplated at the time of contracting, as evidenced by the clear promotion path to COO agreed upon from the beginning of his employment. Therefore, the doctrine did not apply, and the termination provisions remained enforceable.
3. Allegation of Just Cause and Repudiation:
Clark Builders initially alleged just cause for termination but later withdrew this claim. Mr. Singh argued that this constituted repudiation of the employment contract, preventing the employer from relying on the termination clause. The Court held that, provided the employer had a good faith basis to allege just cause, the subsequent withdrawal of the allegation did not preclude reliance on the without-cause termination provision.
Outcome:
The Court dismissed Mr. Singh’s claim for common law reasonable notice, which would have been 12 months, and enforced the 90-day termination clause. Mr. Singh was awarded damages representing base salary, vehicle allowance, and benefits for the 90-day period, plus interest.
Key Takeaways for Employers:
• Negotiation and Clarity: Termination clauses that are clearly drafted and result from mutual negotiation, especially with sophisticated employees, are more likely to be upheld.
• Anticipation of Role Changes: Including provisions that contemplate potential changes in an employee’s role can safeguard the enforceability of termination clauses despite promotions or evolving responsibilities.
• Good Faith in Allegations: Employers alleging just cause should ensure they have a good faith basis, as unfounded allegations can impact the enforceability of termination provisions.
This case underscores the importance of precise drafting and mutual understanding in employment contracts, particularly concerning termination provisions and anticipated changes in employment roles.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018.