The Severability Clause (Canada Contract Laws)

All about the Severability Clause in a contract

A severability clause is a term in a contract, like an employment contract, which tries to make it so that if one term of the contract is found to be void, the other terms in the contract remain enforceable. In other words, a severability clause can try and allow a contract that contains a paragraph later found to be unenforceable to remain enforceable in part - only the offending paragraph will be “severed” or removed from the contract and the balance of the content will remain binding.

A common severability clause may say, for example, in so many words, that units of the contract are paragraphs, and each paragraph is a separate and distinct covenant severable from the others. And in the event a unit is invalid, the offending unit should be read down to the extent of the invalidity and all other units of the contract will remain in full force and effect.

In layman’s terms, a severability clause tries to do one thing: Make it so if one clause of a contract becomes invalid, the balance of the contract should remain enforceable to the fullest extent possible.

Caution! severability clauses are not a sure thing

Severability clauses do not work in every case. Severability clauses become an issue as to whether or not they save the rest of the language in the contract when one unit, one section, or one paragraph is unenforceable and intertwined with another unit, section, or paragraph.

For example, if a contract has two paragraphs about termination, one for termination With Cause and one for Without Cause, but one of those paragraphs is found to be unenforceable because it is contrary to employment standards, the other paragraph may not be saved by a severability clause.

In the case of Waksdale v. Swegon North America Inc., 2020 ONCA 391, that is just what happened. There, the employee was dismissed without cause. In one paragraph, the employment contract clearly denied the employee reasonable notice if there was a dismissal without cause. The employment contract, however, addressed the employee’s entitlements if dismissed with cause in another paragraph in a way that it was conceded it was void because it contravened the Employment Standards Act, 2000.

There was no question that the company would not be permitted to rely on the With Cause provision of the contract. The issue was whether the Without Cause and the With Cause clauses should be considered separately or whether the illegality of the With Cause provision impacts the enforceability of the Without Cause provision. The company submitted that they were two discrete termination provisions so their terms apply to different situations and that the offending With Cause provision should be severed and the Without Cause provision should remain. 

In turn, the company argued the contract’s severability clause saved the Without Cause termination clause:

“You agree that if any covenant, term, condition or provision of this letter outlining the offer of employment with the Company is found to be invalid, illegal or incapable of being enforced by a rule of law or public policy, all remaining covenants, terms, conditions and provisions shall be considered severable and shall remain in full force and effect.”

The Court of Appeal for Ontario however rejected this argument, finding that the With Cause paragraph and the Without Cause paragraph were to be understood together such that the severability clause cannot apply to sever the offending portion of the termination provisions.

Severability clause: Legal test

The test for determining whether a severability clause saves a contract or another clause in a contract is whether the subtraction of the void part of the contract affects the meaning of the remainder, or merely the extent. A severability clause is not permitted to change radically the purport and substance of the original contract with the result that the deletion of the invalid obligation “alters the scope the intention of the agreement” so that what is left is no longer “a reasonable arrangement between the parties. 

It, therefore, goes without saying that in the employment contract context, if one paragraph about termination is void, then if there are any other paragraphs about termination in the contract, they are very likely void too. They are too “intertwined” and sour apple spoils the pot. The severability clause will not work.