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When Is a Termination Clause Unenforceable in Ontario?
If your employment contract contains a termination clause a provision telling you how much notice or pay you will receive if you are let go there is a real chance it is not enforceable. Ontario courts have struck down termination clauses at an accelerating pace since 2020, and the legal standard has not become more forgiving since. Where a termination clause is found unenforceable, it is replaced entirely by common law reasonable notice which for senior or long-service employees can represent many months of compensation above what the clause provided for. The termination clause is the single biggest dollar variable in most Ontario employment contracts, and whether yours holds up is worth knowing before you receive a termination letter rather than after.
The test for enforceability is applied at the time of termination, not at the time of signing. A clause that was valid when you signed it perhaps years ago may not be valid today. Ontario courts apply the law as it exists at the time of termination, which means contracts drafted before significant court decisions may now be unenforceable even though they were properly drafted at the time. Getting your contract assessed is the only way to know where you actually stand.
Did your Ontario employer hand you a termination offer citing your contract's termination clause? Or are you reviewing a new contract before signing?
The clause may not be enforceable and the difference can be significant. Get your contract reviewed before accepting any offer or signing any new terms.
Call: 1-800-771-7882 Get Your Contract ReviewedWhat a termination clause does and why it matters
A termination clause in an Ontario employment contract limits the employer's notice obligation on termination. Without a valid clause, the employer owes common law reasonable notice assessed on the employee's age, length of service, the character of the position, and the availability of comparable work. Common law notice has no fixed maximum and courts have awarded 24 months or more in appropriate cases.
A valid termination clause replaces that common law entitlement with a defined amount often the ESA minimum, or a capped formula. For the employer, a valid termination clause dramatically reduces severance liability. For the employee, it limits what they can recover when the employment ends. The practical stakes are significant: for a 50-year-old executive with fifteen years of service, the difference between ESA minimums and common law reasonable notice can be hundreds of thousands of dollars.
The Waksdale rule and the "for cause" trap
In Waksdale v. Swegon North America Inc. (2020 ONCA 391), the Ontario Court of Appeal established a principle that has reshaped how Ontario employment contracts are assessed. The court held that a termination clause must be read as a whole not in isolated parts. Where any component of the termination provisions violates Ontario's Employment Standards Act, 2000, the entire termination clause is unenforceable, including any otherwise valid "without cause" notice provisions.
The trap that catches most contracts is the "for cause" provision. Many employment contracts contain language terminating employment "for cause" often without specifying that the cause must meet the ESA standard. The ESA permits termination without notice only in cases of "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer." That is a significantly higher standard than the common law just cause threshold. Where a termination clause allows the employer to dismiss "for cause" using language broader than the ESA permits, that provision fails and under Waksdale, the failure contaminates the entire termination clause.
Other common reasons termination clauses fail in Ontario
The "for cause" contamination under Waksdale is the most discussed reason for clause failure, but it is not the only one. Ontario courts assess termination clauses against the ESA on multiple dimensions, and any failure is fatal to enforceability.
Sub-ESA termination notice. Any clause that caps notice at a level that could be below the ESA minimum for any employee covered by the clause including long-service employees voids the clause. A clause that provides one week per year of service, with no floor or ceiling that guarantees the ESA minimum, may fail when an employee has enough service that the formula falls below the statutory requirement.
Missing benefit continuation. The ESA requires that benefits continue during the statutory notice period. A termination clause that limits compensation to base salary without preserving benefits fails to meet the ESA minimum and is unenforceable.
Ambiguous or broadly drafted notice language. Courts resolve ambiguity in termination clauses against the employer under the contra proferentem principle. A clause that could reasonably be read as providing less than the ESA minimum on any interpretation will be construed against the employer.
Failure to address statutory severance pay. Where an employee is entitled to ESA severance pay those with five or more years of service where the employer's Ontario payroll meets or exceeds $2.5 million a clause that does not address statutory severance may be read as eliminating it, which is itself an ESA violation.
Recent post-Waksdale cases the trend continues
The Ontario Court of Appeal applied Waksdale to void a termination clause where the "for cause" provision did not meet the ESA standard. The court also rejected the employer's argument that the "without cause" and "for cause" provisions should be read independently. The clause's exclusion of "reasonable notice at common law" was addressed but the entire clause still fell because the "for cause" provision was non-compliant, and Waksdale required the whole to fail. The employee was entitled to common law reasonable notice.
The Court of Appeal confirmed just how wide the gap is between common law just cause and the ESA's wilful misconduct standard, the same gap that makes "for cause" termination clauses fail under Waksdale. The employer proved just cause at common law for a single serious incident, yet the employee was still awarded his ESA termination pay because the conduct was spontaneous rather than deliberate and preplanned. If proving just cause in court is not enough to eliminate ESA minimums, a contract clause that treats the two standards as interchangeable is promising something the ESA does not permit, and that is precisely why such clauses are void.
The post-Waksdale trend is consistent: Ontario courts are applying strict scrutiny to every component of termination clauses, are refusing to read "without cause" and "for cause" provisions independently, and are rejecting severability arguments. Contracts drafted before 2020 and even some drafted after 2020 without expert legal review are frequently void on their face.
Note: Employment law continues to evolve. Cases decided after the publication of this post may affect the analysis. Verify the current state of the law with legal counsel before relying on any specific case outcome.
Is your Ontario termination clause post-Waksdale compliant?
Get your employment contract reviewed before you need to rely on it or before you sign a new one that limits rights you did not know you had.
Have Your Contract Reviewed Or call us: 1-800-771-7882What happens when a termination clause is struck down
Where a termination clause is found unenforceable, it is replaced entirely by common law reasonable notice. There is no middle ground. The clause does not survive in modified form, the ESA minimum does not automatically apply as a substitute, and the employer does not get credit for having intended to comply. Common law notice is assessed fresh on the individual facts at the time of termination.
Common law notice in Ontario is calculated on what are known as the Bardal factors: the employee's age, length of service, the character of the position, and the availability of comparable employment. Courts have awarded between one and three months per year of service for senior employees in appropriate cases, with awards at or near 24 months for long-service executives. The absence of a valid termination clause removes the only contractual protection an employer has against that exposure.
For employees with written contracts, discovering that the termination clause is unenforceable after receiving a severance offer one calculated on the clause rather than common law is often the most significant single factor in improving the outcome. Get individual legal advice to assess the full common law range for your specific situation.
Red flags to look for in your Ontario employment contract
What employees should do
If you have been terminated and your employer has calculated your severance based on a termination clause in your contract, do not accept the offer before having the clause assessed. The enforceability of the clause is the single most important variable in what you are owed, and a void clause means the calculation needs to start over on common law terms.
If you have an existing contract you have not been terminated under, getting the termination clause assessed now before you need to rely on it gives you a clear picture of your actual legal position and avoids surprises if termination occurs. If your employer is asking you to sign a new or updated contract, understanding what you are giving up before you sign is particularly important: a new, valid termination clause can convert a previously unenforceable clause into an enforceable one, significantly reducing your future notice entitlement. See our guide on severance pay entitlements and executive severance at executive severance negotiation.
What employers should do
Every employment contract in your organization that was drafted before 2020 or drafted after 2020 without specific attention to Waksdale compliance should be reviewed. The for cause provision, benefit continuation language, and notice formula should all be assessed against current ESA requirements and post-Waksdale case law before the next termination puts the clause to the test.
Updating a termination clause requires fresh consideration a genuine benefit provided to the employee at the time of signing to be enforceable. Simply presenting an updated agreement is not sufficient without that consideration. Getting the process right requires legal advice at both the drafting and implementation stages. The cost of a contract review is consistently smaller than the common law notice exposure that an unenforceable clause creates.
Frequently asked questions about unenforceable termination clauses in Ontario
How do I know if my Ontario termination clause is unenforceable?
There is no simple checklist that resolves every case enforceability depends on the specific language of your clause, the ESA provisions in effect at the time of termination, and how courts have applied the law to similar language. That said, the most common failure modes are: a "for cause" provision that does not meet the ESA's wilful misconduct standard; a notice formula that could, for any plausible length of service, produce less than the ESA minimum; and an absence of explicit benefit continuation during the notice period. If your clause has any of these features, a legal review is warranted. The only definitive answer is an assessment of the specific language by an employment lawyer.
Does a termination clause from before Waksdale (2020) still apply in Ontario?
Potentially not. Ontario courts assess termination clause enforceability against the law at the time of termination, not at the time of signing. A clause properly drafted before Waksdale v. Swegon North America Inc. (2020 ONCA 391) may now be unenforceable because the legal standard has been clarified. The court in Waksdale did not announce a new rule it applied longstanding ESA principles more stringently. This means contracts drafted in 2015, 2017, or even 2019 using then-standard language are routinely being found void today. Pre-2020 contracts should be reviewed.
Can my Ontario employer fix an unenforceable termination clause after I have already signed?
Yes but only with your genuine agreement and with fresh consideration. An employer cannot unilaterally replace an unenforceable termination clause with a valid one. Presenting a new contract for signature after employment has started requires the employee's genuine agreement and a real benefit a salary increase, a promotion, a bonus, or another tangible advantage provided at the time of signing. An employee presented with a new contract without consideration or under pressure to sign as a condition of continued employment may not be bound by the new terms. This is precisely the situation where getting legal advice before signing is most important: you may be giving up a significant right common law notice under the void original clause in exchange for a new, valid clause that caps your future entitlement.
If my Ontario termination clause is struck down, what severance am I entitled to?
Common law reasonable notice, assessed on the Bardal factors: your age, length of service, the character of your position, and the availability of comparable work in the market. There is no fixed formula or ceiling. Ontario courts have awarded between one and three months per year of service for senior employees in appropriate cases, with total awards at or near 24 months for long-tenured executives. The specific amount for your situation depends on how the Bardal factors apply to your age, role, and service history. You may also be entitled to ESA statutory severance pay where the threshold conditions are met, in addition to common law notice.
Can a severability clause save an unenforceable termination clause in Ontario?
No. Ontario courts have consistently held both in Waksdale and in the cases that followed it that a severability clause cannot save a termination provision where any component of that provision violates the Employment Standards Act, 2000. The court reads the termination provisions as a whole. A non-compliant "for cause" provision contaminates the entire termination clause, and the severability clause cannot sever the contamination from the non-compliant provisions while preserving the "without cause" cap. If you see a severability clause in your employment contract, it provides no protection for a termination clause that fails the ESA analysis.
Should I sign a new contract that replaces an old, possibly unenforceable one?
Not without understanding what you are agreeing to. If your existing termination clause is unenforceable as many pre-2020 and even some post-2020 clauses are you currently have common law reasonable notice rights as your protection. Signing a new, valid termination clause replaces those rights with whatever the new clause provides. That is often a significant reduction. Before signing, get the old clause assessed to understand whether it is already void if it is, you are being asked to sign away an entitlement you already have in exchange for the employer's new, capped provision. Whether that trade is worthwhile depends on what the new terms offer, your age, your service, and your future plans. Get legal advice before you sign anything.
Questions about your Ontario termination clause or severance entitlement?
Our team reviews employment contracts for Ontario employees and advises on termination clause enforceability, common law severance, and what you are actually owed. Contact us for a confidential consultation before accepting any offer or signing any new contract.
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. ©