In the decision De Castro v. Arista Homes Limited (2024 ONSC 1035), the Ontario Superior Court of Justice assessed a “termination for cause” provision in an employment contract. The central issue: whether the clause aligned with the protections set out in Ontario’s Employment Standards Act, 2000 (“ESA”). The Court concluded the clause went too far – it tried to define “cause” more broadly than the ESA permits. As the Ontario Court of Appeal eventually noted in upholding the decision:
“For example, as the motion judge concluded, the contract contemplates termination for cause based on “a breach of [the] Employment Agreement”. But it does not require that any such breach be either wilful or serious.“.
This outcome is highly relevant for anyone working with a Toronto employment lawyer, a severance package lawyer in Toronto, a wrongful dismissal lawyer or an employment contract lawyer.
Background of the Case
The employee worked as a décor‑store manager for about five years, earning around $80,000 annually (plus benefits) with a bonus of $5,000 at the time of termination. She was 49 years old when the employer terminated her employment on October 26, 2020, amid the COVID‑19 pandemic.
She later brought a motion supported by a wrongful dismissal lawyer, challenging the termination clause and claiming entitlement to common‑law notice rather than just statutory minimums.
What Legal Questions Were Raised?
Three key issues emerged:
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Summary Judgment — Was the motion for summary judgment appropriate, given the employment contract context and available cross‑examinations?
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Termination Clause Validity — Did the contract validly limit her to statutory notice only (i.e., the minimum under the ESA) by using a “cause” clause that might exclude common‑law reasonable notice?
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Mitigation of Damages — Did the employee fail to mitigate her losses after the dismissal, and was the employer’s position on this compelling? For employees working with a severance package lawyer in Toronto or a wrongful dismissal lawyer, mitigation is a key factor in calculating what’s owed.
The Court’s Decision
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On the procedural point, the Court allowed cross‑examinations under a timetable for the summary judgment motion, despite this being a “simplified procedure” context. The employer did not appeal that schedule.
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On the termination clause, the Court determined the wording was broader than permitted under the ESA and was at least ambiguous.
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On mitigation, the employer could not show it had provided proper job‑search assistance (such as job leads, reference letters, or counselling) nor evidence of comparable jobs the employee should have applied to. The employee’s delay in applying for new employment was justified by her personal circumstances (her daughter’s illness and passing) and so the Court found the employer had not discharged its burden.
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As a result, the clause was held unenforceable and the employee was awarded eight months of reasonable notice at common law, including a 10% uplift for lost benefits.
Why the “Cause” Definition Failed
The contract defined “Cause” as including any act or omission that “would in law permit … termination … without notice or payment in lieu of notice.” It also listed “breach of Employment Agreement” as a ground, among others. The Court found two major problems:
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The clause used “shall include”, implying the list of “cause” reasons was not exhaustive, thereby allowing termination for reasons outside the narrow ESA grounds.
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The wording “or … breach of Employment Agreement” permitted termination for contract breaches not captured by the ESA’s strict definition of cause (which includes wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned). Because the contract went beyond that, it failed to comply.
For anyone consulting an employment contract lawyer in Toronto, this highlights that language matters deeply. If your contract’s “cause” definition features broad, non‑exhaustive phrasing or includes general breaches, a Toronto employment lawyer or severance package lawyer in Toronto may argue the entire clause (and possibly the termination section) is legally valid and unenforceable.
Mitigation — Employer’s Responsibilities
The Court also provided guidance for employers who argue a dismissed employee failed to mitigate:
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It is the employer’s burden to show that the employee did not take reasonable steps to secure comparable employment and that such employment was reasonably available.
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Employers should document job‑search assistance: for example, providing job leads, counselling, reference letters, or similar helpful support.
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Simply showing that other people found jobs is insufficient. The employer must show the dismissed employee had access to comparable opportunities and that the employee did not take them.
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The Court emphasised reasonableness, not perfection. An employee’s personal circumstances (in this case, the illness and eventual death of her daughter) can factor into whether the job‑search delay was reasonable.
This aspect is very relevant if you’re working with a wrongful dismissal lawyer or severance package lawyer in Toronto – if an employer claims you failed to mitigate, the employer must show strong evidence of both availability of jobs and your failure to apply.
What This Means for Employees & Employers
For Employees
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If you have been dismissed and your employment contract contains termination‑for‑cause language, you should consult a Toronto employment lawyer or wrongful dismissal lawyer. They will review whether the clause is valid, whether your employer can rely on it, and whether you may be eligible for common‑law notice beyond the statutory minimums.
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When negotiating a severance package, a severance package lawyer in Toronto can evaluate whether sufficient evidence exists that you mitigated your losses, and whether the employer met its obligations.
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If the contract’s termination clause uses broad language (e.g., “any breach,” “cause shall include,” “any act or omission”), you may have stronger grounds for a claim to common‑law reasonable notice rather than being limited to ESA minimums.
For Employers
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When drafting or reviewing employment contracts (with the help of an employment contract lawyer in Toronto), ensure termination‑for‑cause provisions comply strictly with the ESA. That means referencing only the permitted grounds: wilful misconduct, wilful disobedience or wilful neglect of duty that is not trivial and has not been condoned. Avoid broad “breach” references or non‑exhaustive “shall include” language.
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Maintain records of any job‑search assistance provided to a dismissed employee (job leads, counselling, reference letters, etc.) so that if mitigation becomes contested, you have evidence.
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Recognize that if a “for cause” clause is found invalid, you risk exposure to common‑law reasonable notice rather than statutory minimums – a potentially much larger payout.
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Understand that courts look at the actual wording of the contract, not just what the employer “intended”. Even if the employer intended to comply with the ESA, ambiguous or over‑broad drafting can defeat that intent.
Bottom Line
The De Castro case is a strong reminder: the precise words in an employment contract matter – especially for termination clauses. Whether you are an employee or employer in Ontario, and especially if you are in Toronto, working with the right legal expertise is critical. A Toronto employment lawyer, severance package lawyer Toronto, wrongful dismissal lawyer, or employment contract lawyer can help evaluate your contract, your rights, and your obligations in light of this decision.
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 wrongful dismissal lawyer in Toronto, call us today at 647-822-5492 for a case evaluation with an experienced employment lawyer.
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