Having a written employment agreement (commonly called an “employment contract”) in place is one of the most effective ways for businesses in Ontario to protect themselves legally and manage their workforce more effectively. A properly drafted employment contract can help reduce risks related to termination, wrongful dismissal claims, severance package, and disputes over job responsibilities.
This blog post outlines key principles under Ontario law, recent developments from the courts, and tips from a qualified Toronto employment lawyer.
Why an Employment Agreement is Essential
In Ontario, if no written employment agreement exists, the common law will apply, which may entitle employees to significantly more notice or severance upon termination. A well-drafted agreement can legally limit an employee’s severance package entitlements upon termination to only the minimums required by the Employment Standards Act, 2000 (ESA), but only if drafted correctly.
Main Benefits of Having an Employment Agreement Lawyer Prepare Your Employment Agreements:
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Sets clear employment terms and responsibilities
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Can limit termination notice or pay to ESA minimums (if enforceable)
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Provides structure for early (and less costly) dispute resolution
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Helps avoid uncertainty under common law (including an employee’s entitlement to pay in lieu of reasonable notice when negotiating a severance package)
What Makes an Employment Agreement Enforceable?
Under Ontario law, for an employment contract to be legally enforceable, it must satisfy general contract principles:
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Offer and Acceptance: There must be a clear offer of employment, and the employee must accept it (and sign it before beginning their job).
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Consideration: Something of value must be exchanged. In most employment relationships, the job itself is considered valid consideration.
ESA Compliance Is Critical
A key rule in Ontario is that any clause in an employment contract that violates the ESA is void – even if the rest of the employment contract is legal.
In Waksdale v. Swegon North America Inc. (2020 ONCA 391), the Ontario Court of Appeal held that if any termination clause (for cause or without cause) in the agreement breaches the ESA, the entire termination section is unenforceable.
This means:
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employers cannot contract out of ESA minimum standards
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Even a “for cause” clause that sets a lower standard than the ESA will void the termination provisions entirely
Common Mistakes Employers Make in Employment Agreements
Many employment contracts fail because of technical flaws or illegal terms. Here are some of the most common issues:
1. Non-Compliant Termination Clauses
Termination provisions that attempt to give less than ESA minimums (e.g., no severance for “just cause” without meeting ESA’s definition) are invalid.
2. Overreaching For-Cause Language
A “for cause” clauses that does not comply with the ESA’s stricter definition of “wilful misconduct” may invalidate the entire termination section.
3. Non-Compete Clauses
Since October 25, 2021, Ontario law prohibits most non-compete clauses under the Working for Workers Act, 2021, unless the employee is a C-suite executive (e.g., CEO, CFO) or it is part of a purchase and sale of a business.
4. Not Providing the Contract Before the Job Starts
In Ontario, the courts will typically find a contract unenforceable if it is signed after work begins unless fresh consideration is provided (Hobbs v. TDI Canada Ltd., 2004 CanLII 44783 (ON CA)).
5. Not Updating Contracts to Reflect Legal Changes
Ontario employment case law evolves quickly – and employment agreements drafted a few years ago may no longer be valid. For example, many older agreements were invalidated by Waksdale, even though they were drafted in good faith.
Case Law Update: Waksdale and Beyond
The Ontario Court of Appeal in Waksdale v. Swegon made it clear that employers must review termination clauses holistically. If any part of the termination language breaches the ESA – even if that part isn’t being relied upon – it can invalidate the entire clause.
Other cases reinforcing this strict standard include:
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Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679 – Courts interpreted termination language in favour of the employee.
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Rossman v. Canadian Solar Inc., 2019 ONCA 992 – the court found ambiguity in a termination clause, which was interpreted against the employer.
When to Consult a Toronto Employment Lawyer
Ontario courts are placing increasing scrutiny on employment agreements. To stay protected, businesses should work with a qualified Toronto employment lawyer or employment contract lawyer to:
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Draft ESA-compliant agreements that hold up in court
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Review existing employment contracts following legal changes
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Limit common law termination entitlements where appropriate
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Ensure job offers and contracts are executed properly
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Advise on severance and dismissal risks
A severance package lawyer Toronto can also assist with evaluating appropriate severance packages when terminating employees, and determine if severance package negotiations or a wrongful dismissal claim are appropriate.
Best Practices for Employers
To create enforceable and fair employment agreements, keep these Ontario-specific tips in mind:
– Provide the Contract Before Work Begins
Have the employee sign before their first shift. If that’s not possible, offer something extra (e.g., bonus) as fresh consideration.
– Make Employment Conditional on the Signed Agreement
This ensures there’s no implied employment relationship before terms are agreed upon.
– Keep Language Clear and Compliant
Avoid vague or overly aggressive language that could create ambiguity. Courts interpret unclear clauses in favour of employees.
– Avoid Unlawful Non-Competes Agreements
Since most non-compete agreements are now prohibited, use non-solicitation clauses instead—these are still allowed if properly drafted.
– Review Agreements Annually
Update templates as laws change. Get a legal review if you’re making significant changes.
Final Thoughts
A strong employment agreement can give employers more certainty and reduce legal risks – but only if it is properly drafted. Ontario courts are very protective of employee rights, and contracts that fall short of ESA standards will not be upheld.
Whether you’re drafting new agreements or reviewing older ones, working with an experienced employment lawyer, employment contract lawyer, or wrongful dismissal lawyer is essential. If you are managing a termination, an Ontario employment contract lawyer can help you assess your obligations and avoid disputes.
Call Toronto Employment Lawyer Now
It is important for an employee (or an employee) to obtain a legal consultation before taking any action that could affect the situation at workplace. Sezar has experience advocating for both employers and employees, which allows him to anticipate the other side’s arguments and develop an effective strategy, including termination of employment.
If you are looking for a employment agreement lawyer in Toronto, call us today at 647-822-5492 for a case evaluation with an experienced employment lawyer.
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