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Employment Agreement Maintenance in Ontario: When to Review, What to Look For, and How to Update Contracts Without Creating New Risk

Employment Agreement Maintenance in Ontario: When to Review, What to Look For, and How to Update Contracts Without Creating New Risk

Employment agreements are one of the most important risk management tools available to Ontario employers and one of the most commonly neglected. A contract signed at hiring may still be in place ten years later, governing a termination that will be assessed against court decisions made long after the ink dried. Ontario courts have taken an increasingly strict approach to termination clauses over the past decade. Provisions that were standard a few years ago are regularly struck down today defaulting the employer's obligation to common law reasonable notice regardless of what the contract says. Regular review is not a luxury; it is the most cost-effective employment law investment an Ontario employer can make.

The most important thing Ontario employers misunderstand about their contracts
An employment contract does not become more enforceable with age it becomes less so. Court decisions, ESA amendments, and changes to the employee's role all affect whether the original terms hold up. A termination clause that was valid when drafted may be void today.

Ontario courts apply a strict approach to termination clauses any ambiguity, any provision that could be read as falling below the ESA minimum, or any clause that does not address each component of termination entitlements accurately may be found unenforceable. Where the clause fails, the employer owes common law reasonable notice as if the clause never existed. For a senior or long-service employee, that can represent many months of additional compensation above what the contract provided for.

Are your Ontario employment agreements more than two years old or have employee roles, compensation structures, or company ownership changed since they were signed?

An outdated contract may provide no protection at termination. Get your agreements reviewed before you need to rely on them not after a claim is made.

Call: 1-800-771-7882 Review My Employment Agreements

When Ontario employment agreements should be reviewed

Every 1–2 years as a matter of routine regardless of whether anything appears to have changed
After any significant amendment to Ontario's Employment Standards Act, 2000 particularly those affecting termination or severance provisions
After a promotion or role change an employee whose responsibilities have significantly evolved since signing may have a stronger argument that the original contract no longer reflects the employment relationship
After a compensation adjustment particularly where bonuses, commissions, or equity were added after signing without updating the contract
After a merger, acquisition, or restructuring where employment transfers between entities without proper treatment of existing agreements
When introducing new restrictive covenants non-solicitation, non-competition, or confidentiality terms added after hiring require fresh consideration to be enforceable

The key clauses Ontario employers must audit

Termination clause

The most critical and most frequently invalidated provision. Ontario courts will void a termination clause that is ambiguous, that could on any reading provide less than the ESA minimum, or that fails to address each component of the employee's termination entitlement including benefit continuation during the notice period. Clauses drafted before recent court decisions should be reviewed against current case law even if they have not yet been tested.

Compensation and bonus provisions

Compensation terms should clearly define base salary, bonus eligibility and calculation, commission structures, and how each component is treated during a notice period. Ambiguous bonus language "discretionary," "at the employer's sole discretion" frequently creates disputes in wrongful dismissal claims where the employee argues they would have earned the bonus during the notice period. Clarity in the contract reduces this exposure.

Job duties and reporting structure

As roles evolve, contracts that define duties very narrowly can create constructive dismissal exposure where the actual role has diverged significantly from the written description. Updating the job description in the contract with proper consideration prevents an employee from arguing that a change to their duties amounts to a fundamental change to the employment relationship.

Restrictive covenants

Non-competition clauses are rarely enforceable in Ontario employment law and face increased scrutiny in all contexts. Non-solicitation clauses must be narrowly drafted limited to existing clients or employees the departing employee directly worked with to have a reasonable chance of enforcement. Confidentiality provisions must be specific rather than sweeping to avoid the same fate. All restrictive covenants should be reviewed against current Ontario case law.

Remote work and location provisions

Where employees were hired with a specific work location and now work remotely or vice versa the contract should be updated to reflect current arrangements and to reserve the employer's right to require attendance at a defined location on appropriate notice. Failing to address this creates constructive dismissal risk where a return-to-office requirement is imposed on an employee whose contract specifies remote work.

The most common and expensive employment contract mistake Ontario employers make is attempting to update agreements without providing fresh consideration. In Ontario, a new contractual term introduced after employment has already started including an updated termination clause must be supported by fresh consideration to be enforceable. Simply presenting an updated agreement for signature at an annual review is not sufficient. Fresh consideration typically takes the form of a salary increase, a bonus, a promotion, or another tangible benefit provided at the time the updated terms are signed. Without it, the updated provisions may not be enforceable.

How to update Ontario employment agreements properly

1

Identify which agreements need updating and why

Audit your existing agreements against current ESA requirements and recent court decisions. Flag any termination clauses that have not been reviewed since key decisions that tightened enforceability standards. Identify employees whose roles, compensation, or working arrangements have changed significantly since their original agreement was signed these are the highest-risk agreements.

2

Determine what fresh consideration will be provided

Before presenting any updated agreement, identify what fresh consideration will support the new terms. A salary increase, a bonus, a formal promotion, or another tangible benefit provided at the time of signing is the most defensible approach. The consideration must be genuine simply providing notice of the new terms or telling the employee the contract needs updating is not sufficient consideration in Ontario.

3

Get the new agreement legally reviewed before presenting it

A termination clause that is not carefully reviewed against current ESA provisions and Ontario case law may be void from the moment it is signed. Given the cost of getting it wrong defaulting to common law reasonable notice legal review before the agreement is presented is essential. An agreement reviewed and approved before signing is far more defensible than one challenged after a termination.

4

Give the employee time to review and consider

Present the updated agreement with enough lead time for the employee to review it and seek independent legal advice if they choose. An agreement that was presented under pressure to sign immediately at the start of a performance review, at the time of a promotion conversation, or with an artificial deadline is more vulnerable to an enforceability challenge than one where the employee had a genuine opportunity to understand what they were signing.

Common mistakes that render updated agreements unenforceable

Updating a termination clause without providing fresh consideration the updated provision is enforceable only from the date of signing with adequate consideration, not retroactively
Using the same template for all employees without customizing for role, compensation, and current Ontario case law one-size-fits-all agreements create systematic vulnerability
Copying termination clauses from precedents without checking them against current ESA provisions a clause that was valid when the precedent was drafted may fail today if the ESA has been amended since
Presenting updated agreements at the start of a promotion conversation rather than separately mixing the two creates ambiguity about whether the promotion itself was the consideration or whether the employee was pressured to sign
Failing to keep signed copies of all employment agreements and updates inability to produce the signed agreement in litigation significantly weakens any contractual defence

Are your Ontario employment agreements still protecting your organization?

Outdated or poorly drafted contracts are the single most common source of unexpected severance liability for Ontario employers. Our team reviews, updates, and drafts employment agreements that hold up when you need them most.

Review My Employment Agreements Or call us: 1-800-771-7882

Frequently asked questions about employment agreement maintenance in Ontario

Can an Ontario employment agreement become unenforceable over time?

Yes. Employment agreements can become unenforceable for several reasons as time passes: court decisions that apply stricter standards to termination clauses can render previously valid provisions void; ESA amendments can make existing clauses non-compliant; and significant changes to the employee's role, compensation, or working arrangements can affect whether the original contract still accurately reflects the employment relationship. Regular review against current law is the only way to know whether your agreements are still protecting you.

What is fresh consideration and why does it matter when updating contracts?

Fresh consideration is a benefit provided to the employee at the time a new contractual term is introduced such as a salary increase, a bonus, a promotion, or another tangible advantage. In Ontario, a new contractual term introduced after employment has already started requires fresh consideration to be enforceable. Simply presenting an updated agreement for signature without providing a genuine benefit at the same time means the updated terms including any updated termination clause may not be binding on the employee.

What happens if an Ontario termination clause is found unenforceable?

Where an Ontario court finds a termination clause unenforceable, the employer owes common law reasonable notice as if no termination clause existed. Common law reasonable notice has no fixed maximum in Ontario and is calculated on the Bardal factors the employee's age, length of service, the character of the position, and the availability of comparable work. For senior or long-service employees, this can represent many months of compensation far exceeding what the unenforceable clause provided for.

Are non-competition clauses enforceable in Ontario employment contracts?

Rarely. Ontario courts take a highly restrictive approach to non-competition clauses in employment contracts they are viewed as restraints of trade and will be enforced only where they are reasonable in scope, duration, and geographic range, and where enforcement is necessary to protect a legitimate proprietary interest. Most non-competition clauses in standard employment contracts fail this test. Since October 25, 2021, new amendments to Ontario's Employment Standards Act, 2000 have also significantly restricted the use of non-competition agreements for most Ontario employees.

How often should Ontario employers review their employment agreements?

At minimum every one to two years, and additionally whenever there is a significant change in employment law, a change to the employee's role or compensation, a corporate restructuring, or the introduction of new restrictive covenants. Employment agreement review should be treated as an annual compliance task rather than a one-time exercise. The cost of a regular legal review is a small fraction of the severance liability created by an unenforceable contract discovered at the time of termination.

Questions about your Ontario employment agreements?

Our team reviews, drafts, and updates employment agreements for Ontario employers ensuring termination clauses, restrictive covenants, and compensation provisions hold up when you need them most. 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. ©

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