Ontario employment contracts routinely contain termination clauses that attempt to limit an employer's obligations to the bare minimum under the Employment Standards Act, 2000 (ESA). But Ontario courts have struck down hundreds of these clauses for failing to comply with ESA requirements. The difference matters enormously: ESA minimum notice tops out at 8 weeks, while common law reasonable notice can reach 24 months or more depending on age, tenure, position, and the availability of comparable employment.
What is a Termination Notice and Severance?
A termination clause in an Ontario employment contract defines how much notice or pay in lieu of notice an employee receives when terminated without cause. If the clause is valid, it replaces common law reasonable notice. If it is invalid — even slightly — the employee is entitled to common law damages, which are typically far more generous.
Red flags to watch for
Waksdale v Swegon (2020 ONCA 391) established that if any part of the termination provision could violate the ESA — including the for-cause clause — the entire termination provision is void.
If the for-cause clause allows termination without notice for reasons broader than ESA 'wilful misconduct', the entire termination provision fails per Waksdale.
The ESA requires benefits continuation during the statutory notice period. A clause that is silent on benefits may be found to violate the ESA.
Courts interpret ambiguity against the drafter (the employer). Phrases like 'or such greater amount as required by law' can actually save a clause, while vague language may not.
ESA minimums and requirements change. A clause drafted years ago may reference thresholds or provisions that no longer exist, rendering it unenforceable.
The ESA requires severance pay (separate from notice) for employees with 5+ years of service at employers with a payroll of $2.5M or more. Omitting this can void the clause.
Your legal rights
The Employment Standards Act, 2000 (SO 2000, c 41) sets minimum notice (s 57: 1 week per year of service up to 8 weeks) and severance pay (s 64: 1 week per year up to 26 weeks for qualifying employees). Waksdale v Swegon (2020 ONCA 391) held that all termination provisions must be read together and if any part violates the ESA, the entire provision is void. Subsequent cases including Rahman v Cannon Design Architecture (2022 ONCA 451) have reinforced this principle. Common law reasonable notice is assessed using the Bardal factors from Bardal v Globe & Mail Ltd (1960).
Questions to ask before you sign
- 1Does the termination clause provide at least the ESA minimums for notice, severance pay, and benefits continuation?
- 2Does the for-cause clause mirror the ESA definition of wilful misconduct, or is it broader?
- 3Has the clause been reviewed against Waksdale and subsequent Ontario Court of Appeal decisions?
- 4Does the clause address benefits continuation during the statutory notice period?
- 5If I have over 5 years of service, does the clause include ESA severance pay?
- 6What is my estimated common law reasonable notice entitlement if the clause is unenforceable?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.