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Termination Provisions in Ontario Employment Contracts – When Are They Enforceable?


When an employee in Ontario terminated, he or she is entitled to reasonable notice under the common law, unless the employee has signed an employment agreement that contains a valid termination provision that limits or rebuts the common law entitlement. However, a termination provision will be rendered invalid and unenforceable if it does not satisfy certain requirements. In the event a termination provision is invalid and unenforceable, the employee will be entitled to common law reasonable notice.

Termination provisions must comply with statutory minimums

In order to be valid, a termination provision must comply with the minimum termination and severance entitlements set out under the Employment Standards Act (“ESA”). In Machtinger v. HOJ Industries Ltd., the Supreme Court of Canada held:

[…] if an employment contract fails to comply with the minimum statutory notice provisions of the Act, then the presumption of reasonable notice will not have been rebutted.

If any portion of the termination provision provides for less than what the employee is entitled to under the ESA, it will be invalid — and will render all termination provisions within the contract unenforceable as well. Even where a termination provision may potentially breach minimum statutory requirements, all the termination provisions will be void.

The Ontario Court of Appeal decision in Waksdale v. Swegon North America Inc. reaffirmed these principles. In that case, the employee was terminated without cause and provided termination pay according to the terms of the employment contract. The employee argued that since the “without cause” provision did not comply with the ESA minimums, the other termination provisions were rendered unenforceable. The Court of Appeal agreed, writing that an employment contract is not be interpreted on a “piecemeal basis” but rather as a whole. As such, if even one termination provision is found to violate the ESA, all termination provisions will be void and unenforceable. This will be the case even if the employment contract contains a severability clause.

In the recent Ontario decision Henderson v. Slavkin the court held that the confidentiality and conflict of interest clauses did not comply with the ESA minimums. As a result, even though the termination clause was compliant, all the termination provisions were found to be invalid due to the non-compliance of the confidentiality and conflict of interest clauses.

Termination provisions must be clear and unambiguous

A termination provision may be unenforceable if the wording is vague or ambiguous. Due to the power imbalance often inherent in the employer-employee relationship, the courts will apply the principle of contra proferentum. While this does not mean that there is “a specific phrase” that the parties must use, the Ontario Court of Appeal has affirmed that a “high degree of clarity is required and any ambiguity will be resolved in favour of the employee” (Nemeth v. Hatch Ltd.).

Contact an Ottawa Employment Lawyer

Recent case law developments have resulted in many termination provisions being unenforceable. If you have signed an employment contract and have been terminated, contact one of our employment lawyers. Our Ottawa employment lawyers can review your employment contract and advise you whether, despite the presence of a termination provision, you are entitled to common law reasonable notice.


* The information in this article is intended for informational purposes only and does not constitute legal advice.