When a Termination Clause Is Not Enforceable in Ontario
Many employment contracts limit what an employee gets on termination. But a termination clause has to follow the Employment Standards Act (ESA) in every respect. If any part of it falls short, a court can strike the whole clause and award reasonable notice at common law, which is often much greater.
- A clause that gives less than the ESA minimum in any situation can be void, even if you were not in that situation.
- The Ontario Court of Appeal in Waksdale v. Swegon (2020) held that an unlawful for-cause provision can void the without-cause clause too.
- ESA standards, such as 'wilful misconduct', are stricter than the common law notion of 'just cause'.
- A void clause can mean reasonable notice at common law, not the ESA minimum.
The basic rule
Employers and employees cannot contract out of the ESA. A clause that tries to give you less than the Act, even in one scenario, is unlawful. Courts read termination provisions as a whole, so one bad part can undo the rest.
Common problems
- A for-cause provision that allows termination without any notice or pay for conduct that is less than the ESA's high 'wilful misconduct' standard.
- Language saying employment can end 'at any time' or 'for any reason', without tying notice to the ESA's rules.
- Failing to continue benefits or to guarantee all ESA entitlements during the notice period.
- Limiting notice to a fixed period that could be less than the ESA minimum for a long-service employee.
Waksdale v. Swegon
In Waksdale, the Court of Appeal found that a for-cause provision breached the ESA because it denied notice for conduct that was less than wilful misconduct. It held that, because the contract had to be read as a whole, the invalid for-cause clause meant the without-cause clause could not be enforced either. The employee was entitled to reasonable notice at common law. Later cases have applied this approach, and courts continue to look at how clauses are worded.
What this can mean for you
- Get your contract and look at the whole termination section, not just the notice period.
- Note your length of service, age, role and the job market, because reasonable notice depends on them.
- Do not sign a release before asking whether the clause is valid.
- Remember that an employer can still argue the clause is valid, so expect a negotiation.
For employers
Have employment contracts reviewed regularly. Use clear wording that meets or beats the ESA in all circumstances, avoid for-cause language that goes beyond the ESA, and update templates after changes in the law.
Common questions
My contract says I only get the ESA minimum. Is that enforceable?
It depends on the exact wording and the whole termination section. Many such clauses have been struck down. A review is the only reliable way to know.
Can a paralegal help with a wrongful dismissal claim?
Yes, for claims within the Small Claims Court limit. Larger claims are usually brought in the Superior Court by a lawyer.
This guide is general information for people in Ontario, not legal advice. Rules, forms and deadlines change, and every situation is different. Check the current rule or speak to a licensed legal professional before you act.
Not sure where you stand? A licensed paralegal can look at your documents and tell you your options.
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