Ontario Employment Contracts: Outdated Terms Could Cost You
In Ontario, an employment contract is one of the most important legal documents between an organization and a worker. But whether you call it an employment agreement, staff employment contract, or contract of employment, one thing is clear: the wording must be kept up to date to remain enforceable under Ontario law.
Recent court decisions have shown that many standard employee contracts may no longer hold up in court. Even seemingly routine clauses such as termination, arbitration, or renewal terms have been struck down when challenged.
This article explains what’s changed, who is affected, and why employers and employees alike should review their employment contracts now.
The Risks of Outdated Employment Agreements in Ontario
Ontario courts are taking a closer look at every clause in a contract, not just the termination clause. If a provision contradicts or attempts to override Ontario’s Employment Standards Act, 2000 (ESA), it may be found unenforceable.
Once a clause is voided, the employee may be entitled to common law remedies far exceeding what the employer expected to pay. That’s why organizations must now review contract employee agreements carefully, even if they were drafted only a few years ago.
How Courts Are Reinterpreting Employment Contracts
1. Dufault v. Township of Ignace (2024 ONCA 3)
This 2024 Ontario Court of Appeal decision confirmed that a termination clause was unenforceable because it failed to mention ESA minimums, such as severance and vacation pay. Even though the clause attempted to provide four weeks’ notice, it did not clearly guarantee ESA compliance. As a result, the employer was ordered to pay significantly more.
2. Waksdale v. Swegon North America Inc. (2020 ONCA 391)
In this foundational case, the Court of Appeal ruled that if any part of a termination section is non-compliant with the ESA, the entire termination provision fails even if the clause the employer tried to rely on was valid. Employers cannot “sever” bad clauses after the fact.
3. Bertsch v. Datastealth Inc. (2025 ONCA)
This recent ruling by the Court of Appeal upheld a clause that clearly and explicitly limited entitlements to ESA minimums. The clause survived judicial scrutiny because it was unambiguous and legally compliant. This confirms that ESA-only clauses can still work, but only when drafted with precision.
4. Uber Technologies Inc. v. Heller (2020 SCC 16)
While not limited to employees, this case shows that arbitration clauses forcing workers to resolve disputes overseas at high cost can be struck down. The clause was deemed unconscionable and an illegal attempt to contract out of ESA rights.
5. Bhasin v. Hrynew (2014 SCC 71)
The Supreme Court recognized a general duty of honest performance and good faith in all contracts, including employment contracts. This affects renewal, termination, and performance-related clauses employers must act fairly, even if the contract gives them discretion.
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“An employment contract can shape your entire working relationship. What you agree to today may affect your rights tomorrow.
Before signing, speak with a lawyer to ensure you’re protected and fully informed.”
What Employers Should Do
Ontario organizations must take proactive steps:
- Review every clause, not just termination provisions
- Ensure contracts clearly meet or exceed ESA minimums
- Avoid ambiguous or outdated language like “sole discretion” or “at any time”
- Have a workplace lawyer review and update templates regularly
A properly drafted employment agreement protects your organization, clarifies expectations, and limits liability.
What Employees Should Watch For
If you’re starting a new role or facing termination:
- Do not assume the contract is enforceable just because it’s in writing
- Beware of clauses that limit your rights without mentioning ESA entitlements
- If you’ve been dismissed, your contract may not hold up in court you could be owed more than you think
Seeking legal advice can help determine whether your employee contract is enforceable and what your true entitlements are.
Final Takeaway
Ontario courts are taking a tougher stance on employment contracts. Whether you’re an organization issuing a contract of employment or a worker offered a new staff employment contract, outdated clauses can lead to costly legal disputes.
Don’t wait until you’re in court get your contracts reviewed now.
Contact us by phone toll-free at 1-800-771-7882 | Email us at [email protected]
FAQs About Employment Contracts in Ontario
If any part of your contract violates the ESA, especially a termination, severance, or benefits clause, the courts may strike it down and award common law damages instead. That can significantly increase your entitlements.
Only with your informed consent. A contract cannot be changed unilaterally. If major changes are made without agreement, it could amount to constructive dismissal.
Not necessarily. If it attempts to limit your rights without clearly preserving ESA entitlements, the clause may be unenforceable even if ESA isn’t mentioned at all.
Yes, verbal employment agreements are legal in Ontario. However, they are harder to prove and enforce. If there is no written agreement, courts will rely on conduct, policies, and statutory minimums to determine the terms of employment.
Written contracts are strongly recommended for clarity and protection.
No one can be “forced” to sign a contract. However, an employer may condition continued employment on signing a revised contract.
For the contract to be enforceable, consideration must be provided, such as a raise, promotion, bonus, or other benefit.
Without fresh consideration, the revised contract may not be legally binding.
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. ©
Workplace Law Topics: Employee Contracts, Wrongful Dismissal, Termination and Severance, Constructive Dismissal