Contra Proferentem – Ambiguity in Employment Contracts

When issues arise during an employment relationship, the employment agreement is typically the first point of refence to determine how to navigate the dispute, and what the employer and employee agreed to at the commencement of the employment relationship. However, an agreement with language that is ambiguous or unclear may make it difficult to determine how certain should be interpreted. As a result, the courts have relied on the principle of contra proferentem, which is a Latin term for “against the offeror”, to resolve such ambiguities.

General Rule

Generally, if there is any doubt or ambiguity about the meaning or any part of the contract, then the term of the contract will be construed against the person who inserted the term and is trying to rely on it—in other words, the person who has drafted the contract.

In the employment context, the person who drafted the contract is almost always the employer.

Therefore, employers  should  be careful when drafting their employment agreements, and apply diligence, seek clarity, and ensure that the language used in the agreement leaves no room for misinterpretation. As we know, a poorly drafted termination clause can end up costing an employer more than they bargained for.

Contra proferentem helps to mitigate any unfairness by putting the onus on the drafter to be clear and precise, and giving the benefit of doubt to the party upon whom the contract is imposed as to what term that party actually agreed upon. In the employment context, where there is already a power imbalance, this benefit therefore goes to the employee to help retip the scales.

Where an employee has more of a hand negotiating their employment terms, contra proferentem is less likely to automatically apply.

Ambiguity in Employment Agreements

While “ambiguity” can itself be ambiguous, the Ontario Court of Appeal in Amberber v IBM Canada Ltd., 2018 ONCA 571, affirmed that ambiguity needed more than merely competing interpretations. Rather, ambiguity required an objective evaluation of whether two or more reasonable interpretations existed

Ambiguity also needs to be genuine after reading the clause as a whole, rather than created after interpreting parts of the clause individually.

Where an employer drafts an employment contract on a take-it-or-leave-it basis, the contra proferentem rule would require that, where ambiguity exists, the more favourable interpretation be granted to the non-drafting party.

Contra proferentem – a Last Resort?

In 5009678 Ontario Inc v Rock Developments Inc, 2020 ONSC 630, the Ontario Superior Court  affirmed that contra proferentem ought to be invoked as a last resort, when the meaning of the contract cannot be ascertained by all other principles of construction.

Although this may be the case, contra proferentem is often used in the employment context, particularly with respect to termination clauses and restrictive covenants, where employers tend to unilaterally impose employment terms on an employee, and where the power imbalance is significant.

Where courts interpret restrictive covenants or termination clauses against the drafter, these clauses are generally found to be void and unenforceable—meaning they ultimately provide no protection to the employer. Instead, contrary to what the employer intended, these void and unenforceable clauses result in less restrictions to the employee with respect to their ability to compete or solicit, or result in their notice period being extended far beyond the statutory minimum.

Contact Us for Help

If you are an employer who is wants their agreements or policies drafted or updated, or an employee  seeking to clarify your rights, our team of experienced employment and human rights lawyers are happy to help. Contact us at 1-(800)771-7882, or email [email protected] and we would be happy to assist.

If you are a small or medium size company looking for full-service support, visit our CLO program page for our strategic solutions.

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Disclaimer: This blog is not intended to serve as, or should be construed as legal advice, and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call 1-(800)771-7882, or email [email protected].

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