A termination clause in an Ontario employment contract is enforceable only if it complies with the Employment Standards Act, 2000 and does not contain any provision, including a for-cause provision, that falls below ESA minimums. Under Waksdale v. Swegon North America Inc. (2020 ONCA 391), a single non-compliant provision voids the entire termination scheme.
That single principle has reshaped employment contract risk across the province. Over the past five years, Ontario courts have invalidated a remarkable number of termination clauses, many in agreements employers believed were airtight. When a clause fails, the employee is no longer capped at statutory minimums and instead becomes entitled to common-law reasonable notice, an award that can reach 24 months of salary and benefits or more. For a long-tenured, senior employee, the gap between what the contract promised and what a court orders can easily exceed $100,000 CAD.
This post is written for Ontario employers. It explains why termination clauses fail, walks through the leading Court of Appeal decisions every employer should know, looks at a recent employer-side win, and sets out what an enforceable termination clause looks like. At Hadri Law, our corporate and commercial practice regularly involves reviewing and drafting employment agreements, and termination language is where we see the most expensive mistakes.
ESA Minimums vs. Common-Law Notice: Understanding the Gap
Ontario operates a two-tier system for what an employee is owed when dismissed without cause.
The first tier is the statutory floor set by the Employment Standards Act, 2000, S.O. 2000, c. 41. Part XV of the ESA establishes minimum notice of one week per year of service, to a maximum of eight weeks. Qualifying employees, generally those with five or more years of service whose employer has a payroll of at least $2.5 million or who are let go in a mass termination, are also entitled to severance pay of one week per year of service up to a maximum of 26 weeks. (See the Employment Standards Act, 2000, ss. 54-66, and O. Reg. 288/01.) The ESA also requires benefits to continue through the statutory notice period.
These are minimums, not ceilings. A valid termination clause can lawfully cap an employee's entitlements at the ESA floor and exclude common-law notice, but only if the clause is drafted correctly. Get the drafting wrong and the cap disappears.
The second tier is common-law reasonable notice, which applies when no enforceable clause limits the entitlement and which is far more generous. It is assessed using the Bardal factors: length of service, the employee's age, the character of the employment including seniority and responsibility, and the availability of similar employment. Courts are clear this is not a formula or a fixed number of months per year of service. Awards range widely, from a few weeks for short-service junior staff to 24 months or more for senior, long-tenured employees in specialised roles.
This is the core financial risk. An employer who assumes its contract caps liability at, say, eight weeks may find that an unenforceable clause exposes it to a common-law award many times larger, with nothing standing between the employer and a full common-law damages assessment.
Why Termination Clauses Fail in Ontario: The Core Legal Principles
Before looking at individual cases, it helps to understand the legal principles Ontario courts apply to a termination clause. Four ideas do most of the work.
First, employment contracts are construed against the drafter. This is the principle of contra proferentem, and in practice any genuine ambiguity in a termination clause is resolved in the employee's favour. Employers do not get the benefit of the doubt.
Second, the contract is read as a whole. Courts do not assess each provision in isolation, so a defect in one part of the termination scheme can void the entire scheme, even if the offending provision was never the one the employer relied on.
Third, a severability clause will not rescue a non-compliant termination provision. If the clause contravenes the ESA, the cap falls, and boilerplate severability language does not save it.
Fourth, dismissing an employee without ESA minimums for misconduct requires the employer to meet the ESA's "wilful misconduct" standard, which is higher than common-law just cause. Under O. Reg. 288/01, an employee is only disentitled to statutory notice where there is wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and has not been condoned. Many clauses define "cause" more loosely, and that mismatch is fatal.
Together, these principles produce what employment lawyers now call the Waksdale principle: if any termination provision breaches the ESA, even one the employer is not relying on, the entire termination scheme is void and the employee defaults to common-law reasonable notice (Waksdale v. Swegon North America Inc., 2020 ONCA 391).
The Cases Every Ontario Employer Must Know
These principles were built case by case. The following decisions matter most for employers reviewing their contracts today.
Waksdale v. Swegon North America Inc. (2020 ONCA 391)
Benjamin Waksdale was dismissed without cause after roughly eight months of employment. The without-cause provision in his agreement was, on its face, ESA-compliant. The problem lay elsewhere: the same agreement contained a separate for-cause provision that allowed the employer to dismiss without notice for conduct that fell below the ESA's "wilful misconduct" threshold.
The Ontario Court of Appeal held the entire termination scheme void. Because the agreement must be read as a whole, a single ESA-contravening provision, even one the employer never invoked, poisons the complete termination package. It did not matter that the without-cause clause Mr. Waksdale was actually dismissed under was clean. The Supreme Court of Canada refused leave to appeal on January 14, 2021, cementing the rule.
This is the single most consequential employment decision in recent Ontario history. The "just cause" language at issue appeared in thousands of standard contracts, so overnight a vast number of agreements employers believed were enforceable became vulnerable, and large-scale redrafting became a practical necessity. This is the heart of the Waksdale termination clause problem.
Dufault v. Township of Ignace (2024 ONCA 915)
Karen Dufault worked under a fixed-term contract scheduled to end on December 31, 2024. She was terminated without cause on January 26, 2023, nearly two years early, and offered the ESA minimums. Her contract's for-cause provision defined cause more broadly than the ESA's wilful misconduct standard, and the termination language also included the phrases "at any time" and "in its sole discretion."
The Court of Appeal upheld the lower court's finding that the for-cause provision violated the ESA. The agreement's inclusion of language such as the employer's ability to terminate for an employee's failure to perform services imported a standard lower than ESA wilful misconduct, which was enough to void the clause. The Court declined to revisit Waksdale (Dufault v. Township of Ignace, 2024 ONCA 915). Ms. Dufault was awarded over $157,000 in damages.
There is an important nuance here. The Superior Court below had also found the "in its sole discretion" and "at any time" language independently void. The Court of Appeal decided the appeal on the for-cause problem alone and declined to address that issue, so it neither affirmed nor reversed the lower court on that specific point. Either way, the clause was bad. The practical takeaway is that the lower court's ruling on "sole discretion" and "at any time" language remains unchallenged, and prudent employers should treat that language in a termination provision as suspect until an appellate court says otherwise.
The Township sought leave to appeal to the Supreme Court of Canada. Leave was refused on June 5, 2025 (SCC file 41680), leaving the Court of Appeal ruling as the governing authority.
Rahman v. Cannon Design Architecture Inc. (2022 ONCA 451)
In this case, the employment agreement allowed the employer to terminate "for just cause" without notice. At first instance, the motion judge upheld the clause, relying in part on the fact that the employee was a sophisticated professional who had received independent legal advice and negotiated her terms. The Court of Appeal reversed (Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451; the prior decision is reported at 2021 ONSC 5961).
The Court held that an employee's sophistication does not save a termination clause that contravenes the ESA. The "just cause" standard in the agreement was broader than ESA wilful misconduct, which rendered the for-cause provision void under Waksdale, and the entire termination scheme fell with it.
For employers, this closed off a tempting argument. You cannot rely on the fact that an executive negotiated their own contract, or had a lawyer, to defend a clause that does not comply with the statute. The ESA floor cannot be contracted away through a deficient clause, no matter how senior or well-advised the employee.
Render v. ThyssenKrupp Elevator (Canada) Limited (2022 ONCA 310)
Mark Render was an operations manager with roughly 30 years of service, dismissed for just cause following a workplace incident involving inappropriate conduct toward a colleague. The employer relied on common-law just cause to argue he was disentitled even to his ESA statutory notice.
The Court of Appeal drew a careful distinction (Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310). Even where conduct amounts to just cause at common law, disentitling an employee from ESA statutory termination pay requires the higher ESA standard of wilful misconduct, which demands deliberate conduct rather than mere carelessness or even serious negligence. On the facts, the conduct did not meet that threshold, so the employee kept his statutory minimums even though just cause at common law was made out.
The lesson is that a successful just-cause dismissal at common law does not automatically eliminate the ESA obligation. The two standards are different, and a for-cause termination clause must be drafted with the wilful misconduct standard in mind.
The Employer-Side Win: What Bertsch v. Datastealth Means (2025 ONCA 379)
The case law is not uniformly bad news for employers. In May 2025, the Court of Appeal gave employers a constructive precedent in Bertsch v. Datastealth Inc., 2025 ONCA 379, the first broadly applicable appellate endorsement of an ESA-minimum termination clause in several years. It shows that well-drafted clauses still hold up.
Mr. Bertsch was a vice-president dismissed without cause after about 8.5 months. His contract limited him to "only the minimum payments and entitlements" owed under the ESA, and the termination language applied "with or without cause." He argued the clause was ambiguous and should be read against the employer. The Court disagreed and upheld it.
Three features made the difference. First, the clause used explicit ESA-minimum language, tying the entitlement directly to the statute rather than attempting to define termination obligations from scratch. Second, the "with or without cause" framing collapsed the for-cause and without-cause situations into a single provision, which removed the very split that doomed the clauses in Waksdale and Dufault. Third, the agreement included a failsafe ensuring the employee would receive at least the ESA minimums even if some other part of the contract conflicted with the statute.
The Court also clarified the test. The question is not whether an ordinary, non-legally-trained person might possibly misread a clause, but whether the clause can reasonably be interpreted in a way that complies with the ESA. The Bertsch clause could be, so it survived. Importantly, Bertsch does not overrule Waksdale or Dufault. It confirms that those decisions punish bad drafting, not the concept of an ESA-minimum cap itself.
Common Drafting Mistakes That Void Termination Clauses
The recurring failure patterns from the case law give you a practical checklist. The mistakes that most often void Ontario termination clauses include:
- Using "just cause" rather than the ESA's "wilful misconduct" standard in a for-cause provision.
- Defining cause to include performance issues, insubordination, or "breach of policy" without the wilful misconduct qualifier.
- Using "at any time," "sole discretion," or "absolute discretion" language in the termination section (the live risk from Dufault).
- Addressing notice but ignoring severance pay or benefit continuation, which the ESA separately requires.
- Keeping separate for-cause and without-cause provisions where the for-cause side dips below the wilful misconduct threshold, even if the employer never relies on it.
- Relying on a severability clause to cure a defective provision, which Ontario courts will not allow.
A single one of these, in a part of the contract the employer never expects to use, is enough to void the entire scheme and trigger common-law notice.
How to Draft an Enforceable Termination Clause in Ontario
Drawing on Bertsch and the broader post-Waksdale guidance, a compliant Ontario termination clause generally shares the following features.
- A single, unified termination clause built on "with or without cause" framing, rather than two separate provisions that can be played off against each other.
- Entitlements on termination expressly limited to the ESA minimums, covering notice or pay in lieu, severance pay where applicable, and benefit continuation through the notice period.
- Where cause is addressed, language that tracks the ESA precisely, referring to wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and has not been condoned, rather than the looser "just cause" standard.
- A failsafe provision guaranteeing that, if any part of the clause conflicts with the ESA, the employee receives no less than the statutory minimum.
- No "at any time," "sole discretion," or "absolute discretion" language in the termination section.
- No reliance on a severability clause to do the heavy lifting. The clause is drafted to comply from the outset.
A deliberate caution: these are the elements that make a clause more likely to survive, not a template. Small wording choices have repeatedly decided these cases, and an off-the-shelf clause copied from another agreement is exactly how employers ended up exposed in the first place. Any employer who wants a clause that will hold up should have it drafted or reviewed by an employment lawyer; our Toronto employment lawyers page explains how we help. The same enforceability scrutiny applies to other clauses in an employment agreement, which is why a temporary layoff clause needs the same careful drafting to survive a challenge.
How Often Should Employers Update Employment Contracts?
The law in this area has moved dramatically between 2020 and 2025. A contract that looked solid before Waksdale may now be void, and a clause drafted before Dufault and Bertsch may not reflect the current standard. That pace of change makes a regular review cycle a genuine risk-management tool, not an optional nicety. As a practical rule, employers should revisit their standard agreements whenever a significant appellate decision or legislative update lands, and in any event every two to three years. Every new hire should receive an updated, reviewed agreement rather than a recycled copy of an old one.
Updating contracts for existing employees raises a separate issue. Imposing new terms mid-employment generally requires fresh consideration, meaning the employee must receive something of value in exchange for the new terms. Simply announcing the change, or asking an employee to sign a revised contract without giving anything in return, may leave the update unenforceable. The contract's structure matters too, which is why it is worth understanding the differences between fixed-term and indefinite employment contracts before rolling out new agreements.
Frequently Asked Questions
What happens if my termination clause is unenforceable in Ontario?
The cap disappears and the employee becomes entitled to common-law reasonable notice instead of ESA minimums. That award is assessed using the Bardal factors and can reach 24 months or more, often far exceeding what the contract promised.
Does a severability clause save a bad termination clause in Ontario?
No. Ontario courts have consistently held that a severability clause cannot rescue a termination provision that contravenes the Employment Standards Act, 2000. The only reliable fix is to draft a compliant clause from the start.
What is the difference between just cause and wilful misconduct in Ontario employment law?
Common-law just cause justifies dismissal without common-law notice. ESA wilful misconduct is a higher, more deliberate standard required to disentitle an employee from statutory minimums under O. Reg. 288/01. As Render v. ThyssenKrupp confirmed, conduct can meet common-law just cause yet still fall short of wilful misconduct, leaving ESA entitlements intact.
How do I know if my employment contract has an enforceable termination clause?
Look for the failure patterns from the case law: a for-cause provision using "just cause" rather than wilful misconduct, "sole discretion" or "at any time" language, missing severance or benefit continuation terms, or reliance on a severability clause. Any one can void the whole scheme, so a review by an employment lawyer is the reliable way to be sure.
What is common-law reasonable notice and how much can it be?
It is the compensation owed when no enforceable clause limits an employee's entitlement. Courts assess it using the Bardal factors: length of service, age, character of employment, and availability of similar work. There is no fixed formula, but awards for senior, long-tenured employees can reach 24 months of salary and benefits or more.
Can I limit an employee to ESA minimums in a termination clause?
Yes, if it is drafted correctly. Bertsch v. Datastealth (2025 ONCA 379) confirmed that an ESA-minimum cap is enforceable when the clause uses clear statutory language, applies "with or without cause," and includes a failsafe guaranteeing at least the ESA minimum.
Do I need to update my employment contracts after Waksdale?
Almost certainly, if your contracts predate 2021 or have not been reviewed since. Waksdale made for-cause language that falls below the ESA standard fatal to the entire termination scheme, even where the employer relies only on a clean without-cause clause. Many pre-Waksdale agreements contain exactly this defect.
What did Dufault v. Ignace change for Ontario employers?
Dufault reinforced that broad cause definitions, such as terminating for an employee's failure to perform services, import a standard below ESA wilful misconduct and void the clause. It also left intact the lower court's concern about "sole discretion" and "at any time" language, which the Court of Appeal did not need to decide. Treat both as serious risks.
Contact Hadri Law
Defective termination clauses are among the most common and most expensive legal problems Ontario employers face. If your employment contracts were drafted before 2021, or have not been reviewed since Waksdale, Dufault, or Bertsch, there is a real chance they contain language that will not hold up in court, and the cost of finding that out in litigation is steep.
If you would like an existing agreement reviewed, or a new termination clause drafted to the current standard, call +1 (437) 974-2374 to book a free consultation. Hadri Law advises employers across Toronto and the GTA on employment contracts and workplace policy, and we serve clients in English, French, Spanish, and Catalan. You can also learn more about how we help businesses on our Toronto employment lawyers page.
This article provides general information and is not legal advice. Every situation is different, and the case law in this area continues to develop. Reading it does not create a solicitor-client relationship. Contact a lawyer to discuss your specific circumstances.
Sources & Official Resources
- Employment Standards Act, 2000, S.O. 2000, c. 41: https://www.ontario.ca/laws/statute/00e41
- O. Reg. 288/01 (Termination and Severance of Employment): https://www.ontario.ca/laws/regulation/010288
- Your Guide to the Employment Standards Act, Termination of Employment: https://www.ontario.ca/document/your-guide-employment-standards-act-0/termination-employment
- Your Guide to the Employment Standards Act, Severance Pay: https://www.ontario.ca/document/your-guide-employment-standards-act-0/severance-pay
- Waksdale v. Swegon North America Inc., 2020 ONCA 391: https://www.canlii.org/en/on/onca/doc/2020/2020onca391/2020onca391.html
- Dufault v. Township of Ignace, 2024 ONCA 915: https://www.canlii.org/en/on/onca/doc/2024/2024onca915/2024onca915.html
- Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451: https://www.canlii.org/en/on/onca/doc/2022/2022onca451/2022onca451.html
- Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310: https://www.canlii.org/en/on/onca/doc/2022/2022onca310/2022onca310.html
- Bertsch v. Datastealth Inc., 2025 ONCA 379: https://www.canlii.org/en/on/onca/doc/2025/2025onca379/2025onca379.html
