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Employment Contracts in Ontario: Rights, Clauses & Legal Risks
Employment contracts in Ontario define the terms of your working relationship including your pay, duties, and crucially, what happens when employment ends. Whether you are being asked to sign a new contract, reviewing an agreement before your first day, or dealing with a termination, understanding what your contract actually says and whether it is enforceable can make a significant financial difference. Many employment contracts contain clauses that look standard but can cost employees significant sums if they are not reviewed before signing.
Were you asked to sign a new employment contract or given a termination package?
Employment contracts regularly contain termination clauses that limit your rights. Many of these clauses are unenforceable under Ontario law. Do not sign anything without having it reviewed by a lawyer first.
Call: 1-800-771-7882 Speak With an Employment LawyerWhat is an employment contract in Ontario?
An employment contract is an agreement between you and your employer that sets out the terms of your employment. It may be a written document, a verbal agreement made during hiring, or terms implied through workplace conduct and practice. Most people think of a written contract, but all three forms can be legally binding.
Regardless of what your contract says, it cannot remove your minimum entitlements under the Employment Standards Act, 2000. Any clause that attempts to give you less than the ESA minimum for termination pay, vacation pay, overtime, or other statutory rights is void to that extent. The ESA minimum applies regardless of what the contract says.
Key clauses to watch for before you sign
Termination clause
The most important clause for most employees. It determines how much notice or pay you receive if employment ends without cause. A restrictive termination clause can limit you to the ESA minimum and eliminate your common law entitlement, which is often significantly higher.
Probationary period
Most contracts include a probationary period, typically three months. Even during probation, your employer must comply with ESA minimum standards. Probation does not eliminate your rights — it only affects how quickly certain entitlements kick in.
Bonus and incentive provisions
How bonuses are described in your contract affects whether they are owed during a notice period after termination. Vague language like "discretionary" can be used to deny bonuses that were effectively part of your regular compensation.
Non-compete clause
Non-compete clauses restrict you from working for competitors after leaving. In Ontario, non-compete agreements are generally unenforceable for most employees. They are only valid in limited circumstances, such as for senior executives or in the context of a business sale.
Non-solicitation clause
Non-solicitation clauses prevent you from contacting former clients or colleagues after leaving. Courts are more willing to enforce these than non-competes, particularly where they are reasonable in scope and duration.
Confidentiality clause
Confidentiality provisions restrict you from disclosing the employer's proprietary information including client lists, trade secrets, and business strategies. These are commonly enforceable where reasonably drafted and proportionate in scope.
When termination clauses become unenforceable
Ontario courts scrutinize termination clauses carefully. A clause that appears to limit you to the ESA minimum may not hold up if it was drafted in a way that violates the ESA — even in scenarios that never actually occurred. Several court decisions have significantly expanded employees' rights in this area.
If any part of a termination provision violates the ESA — including a for-cause section that is never triggered — the entire termination clause may be void, entitling the employee to common law notice.
Confirmed that termination provisions must clearly and unambiguously comply with ESA minimum standards. Ambiguous language that could allow sub-minimum terminations renders the clause unenforceable.
These decisions mean that even contracts that look standard may contain termination clauses that will not hold up in court. Having a lawyer review your contract before you sign — and before you accept any termination package — is the most reliable way to know where you actually stand.
Were you handed a termination package based on a clause in your employment contract?
The termination clause in your contract may be unenforceable under Ontario law. If it is, you may be entitled to significantly more than you were offered. Get your contract reviewed before you sign a release.
Get Your Contract Reviewed Or call us: 1-800-771-7882Can your employer change your employment contract?
Employers cannot unilaterally change essential terms of your employment contract without providing something of value in return — legally known as fresh consideration. Significant unilateral changes to compensation, job duties, termination provisions, or working location imposed without your agreement may constitute constructive dismissal, entitling you to treat the employment as terminated and claim damages. If your employer is asking you to sign a new contract that changes your existing terms, get legal advice before signing.
What if you never signed an employment contract?
Employees who work without a written contract may actually be in a stronger position on termination than those who signed a restrictive one. Without a written contract limiting your rights, your entitlement on dismissal defaults to common law reasonable notice, which courts calculate based on the Bardal factors and which can result in months of compensation for long-serving employees. The absence of a signed contract does not mean the absence of rights — it often means more of them.
What to watch for before signing any employment contract
Frequently asked questions about employment contracts in Ontario
Are verbal employment contracts enforceable in Ontario?
Yes. Verbal employment agreements can be legally binding in Ontario. The difficulty with verbal agreements is proving the specific terms if a dispute arises. Without written evidence of what was agreed, the parties may have different recollections, and the dispute often defaults to what can be proven.
Can my employer force me to sign a new employment contract?
Your employer can ask you to sign a new contract, but significant changes to essential terms require fresh consideration — something of value provided in exchange. Simply telling you to sign or face termination may not be sufficient consideration. If the new contract reduces your rights, get legal advice before signing.
What happens if a termination clause is invalid?
If a termination clause violates the ESA — including in a scenario that was never triggered — courts may find the entire termination provision void. This means your entitlement on dismissal defaults to common law reasonable notice, which is frequently significantly higher than the ESA minimum. This is why having a lawyer review a termination package before you sign a release is so important.
Can an employer change my job duties without my consent?
Significant unilateral changes to your core job duties, compensation, or working conditions may constitute constructive dismissal. Minor adjustments within the normal scope of your role generally do not. If your employer has substantially changed your role without agreement, get legal advice to assess whether you have a constructive dismissal claim.
Should I have a lawyer review my employment contract?
Yes, particularly before you sign. The termination clause alone can determine whether you receive weeks or months of compensation if employment ends. Non-compete and non-solicitation clauses can affect your ability to work in your industry after leaving. The cost of a contract review is minimal compared to the financial impact of signing an unfavourable agreement without understanding it.
Does my employer have to give me a written employment contract in Ontario?
No. Employers are not legally required to provide a written employment contract. However, without a written contract limiting your rights, your entitlement on dismissal typically defaults to common law reasonable notice, which is often significantly higher than the ESA minimum. The absence of a written contract is not always a disadvantage for employees.
Need an employment contract reviewed in Ontario?
Whether you are reviewing a new offer, have been asked to sign a contract change, or have received a termination package based on a contract clause, our team can help. We advise employees across Ontario on employment contract reviews, termination entitlements, and constructive dismissal claims. Contact us for a confidential consultation.
Call us at 1-800-771-7882 or fill out the form below and we will be in touch.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©