A stark reminder that severance obligations under employment contracts must be respected…failing to do so not only breaches contractual duties but also exposes employers to common law notice awards — a far more expensive outcome.
In the recent decision of Timmins v. Artisan Cells, 2025 CanLII 2387, the Ontario Superior Court of Justice reinforced a critical message for employers: failing to honour contractual severance obligations can lead to a finding of repudiation and expose the employer to significant liability under common law.
Here’s what employers and employees need to know.
Background
The employee, hired in 2019 as Vice-President of an American gene therapy company, was later promoted to Executive Vice-President, leading to the creation of a Canadian subsidiary, Artisan Cell Labs Inc. (ACL). His compensation package included a base salary of $475,782 CAD, stock options, bonuses, and benefits.
His employment agreement specified that upon termination without cause, he would be entitled to the greater of three months’ pay or his minimum entitlements under Ontario’s Employment Standards Act, 2000 (ESA).
When the employee was dismissed in 2023, instead of the employer paying the contractual severance, the employer offered only one week of ESA termination pay and additional severance — but on the condition that he sign a full and final release. The employee refused and sued for constructive dismissal.
The Court’s Decision
The Court ruled decisively in the employee’s favour.
- Repudiation of the Agreement:
The employer’s failure to honour the severance provision demonstrated an intention not to be bound by the employment contract. This amounted to repudiation — similar to what the Court found in the earlier case Perretta v. Rand A Technology Corporation.
A “reasonable person” would conclude that the employer no longer intended to uphold the severance terms and improperly used severance as leverage to secure a broader release.
- Damages for Common Law Notice:
As a result of the repudiation, the Court awarded the employee nine months’ common law notice, amounting to $456,908 in damages. In determining the notice period, the Court considered the employee’s:
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- Length of service (3.5 years)
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- Specialized role in the niche gene therapy industry
- No Punitive Damages:
Although the employee also sought punitive damages, the Court declined, finding that the significant common law damages award was sufficient deterrence for the employer’s misconduct.
Why the Employer’s Approach Failed
A key reason the Court sided with the employee was the improper demand for a release. The severance payment was not conditional on the employee signing any release under the terms of the agreement. The release the employer sought went far beyond a simple severance acknowledgment—it included waiving broader rights, confidentiality obligations, and non-disparagement clauses, which the employer was not entitled to demand.
Takeaways
This case underscores important lessons for employers when terminating employees:
- Honour Employment Agreements
Employers must comply with the severance provisions in their contracts. Trying to renegotiate at the time of dismissal — especially by withholding entitlements — risks repudiating the entire agreement.
- Avoid Improper Leverage
Demanding a release or additional concessions in exchange for severance payments owed under a contract can backfire. If a release is desired, it must be tied only to additional amounts offered above contractual or statutory obligations.
- Get Legal Advice Before Terminating
Employment terminations can carry high legal risks. Consult experienced employment counsel before making offers or demanding releases to avoid costly errors.
- Consider the Risk of Common Law Notice
If an employer repudiates an agreement, courts will award damages based on common law reasonable notice, which is often significantly higher than what the employee would have received under the contract.
Timmins v. Artisan Cells is a stark reminder that severance obligations under employment contracts must be respected. Failing to do so not only breaches contractual duties but also exposes employers to common law notice awards — a far more expensive outcome.
Need Help Navigating Terminations?
At Minken Employment Lawyers (Est. 1990), we can help with terminations, severance obligations, and contract enforcement.
Contact us today at [email protected] or 905-477-7011 to minimize your legal risks and ensure compliance.
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Please note that this article is for informational purposes only and does not constitute legal advice nor should it be relied on as legal advice or opinion.
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