Navigating the start and end of an employment relationship can be legally complex, especially when employers rely on an outdated or poorly drafted employment contract termination clause. A recent Ontario court decision called Wilds v. 1959612 Ontario Inc., 2024 ONSC 3452 provides a clear warning to employers about the legal consequences of non-compliant termination provisions and post-termination conduct. For employees, it reinforces the importance of consulting with a Toronto employment lawyer, especially when facing a sudden job loss or questionable contract terms.
This case offers valuable insights into how courts approach the analysis of an employment contract termination clause and what mistakes can result in serious financial and reputational costs for employers. Let’s explore the facts of the case, the court’s decision, and what it all means for both employers and employees in Ontario.
The Background: What Happened in Wilds v. 1959612 Ontario Inc.?
The employee this case was hired as an executive assistant for a building supplies company. Her employment lasted just 4.5 months before the employer terminated her without cause in October 2020.
The employer relied on an employment contract termination clause the employee had previously signed, which contained deeply flawed language:
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Termination Without Cause Clause: This provision limited the employee’s termination entitlements to the minimum under Ontario’s Employment Standards Act, 2000 (ESA), plus an extra two weeks’ notice or pay. However, she could only receive these minimum statutory amounts if she signed a legal release in the employer’s favour.
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Termination With Cause Clause: This provision outlined nearly a dozen enumerated situations where she could be terminated for cause without notice. These included reasons that did not meet the strict legal standard set out by the ESA.
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Savings Clause: This provision included a so-called “savings clause” that stated if the ESA gave the employee greater entitlements than the contract, the ESA would apply.
When the company terminated her employment without cause, they offered the contractual termination package – but only if she signed the release. She refused, and the employer then withheld all payments, including her statutory minimum notice –just one week’s pay.
Adding insult to injury, the employer:
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Refused to reimburse her for valid business expenses.
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Delayed issuing her Record of Employment (ROE) by over a month.
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Refused to provide a reference letter or even confirm her employment history.
What Did the Court Decide?
The case was decided on summary judgment, meaning the court made a decision based solely on the written evidence without requiring a full trial.The court made several important findings – each of which carries significant legal weight for employment lawyers and HR professionals alike, especially when it comes to employment contract termination clauses.
1. Termination Clauses Were Void and Unenforceable
The court ruled that both the “with cause” and “without cause” termination provisions violated the ESA. Here’s why:
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The termination without cause clause was illegal because it required the employee to sign a legal release before receiving her statutory minimum termination pay and severance pay entitlements – a direct violation of the ESA.
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The termination with cause clause tried to allow terminations without notice for conduct that did not meet the ESA‘s high threshold of “wilful misconduct, disobedience, or neglect of duty.”
This is often the case with poorly drafted employment contract termination clauses. A skilled employment contract review lawyer would have identified these flaws before the contract was signed.
2. The “Savings Clause” Didn’t Save the Day
Employers often insert savings clauses hoping to fix illegal termination clause by saying, “If this conflicts with the ESA, then the ESA applies.” But the court rejected this argument. Justice Vermette found that the clause did not demonstrate clear intent to comply with the ESA and instead created ambiguity – which, by Ontario employment law, must be interpreted in favour of the employee.
This is a key takeaway for employers: you cannot rely on vague catch-all language to fix unlawful employment contract termination clauses. Working with an experienced employment contract review lawyer can help ensure your agreements comply with provincial standards from the outset.
3. Employer’s Conduct Warranted Punitive Damages
Perhaps the most striking part of the judgment was the court’s decision to award $10,000 in punitive damages. The reason? The employer’s post-termination conduct fell “markedly below the ordinary standards of decent behavior.”
Specifically, the court criticized the employer for:
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Withholding statutory entitlements owed under the ESA.
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Failing to reimburse legitimate business expenses.
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Repeatedly refusing to fix these issues – even after being contacted by the employee’s wrongful dismissal lawyer.
The court emphasized that the purpose of the punitive damages was not just to punish the employer but to send a message to other employers: this kind of behaviour will not be tolerated.
What This Means for Employers
If you are an Ontario employer, this case should serve as an important reminder. Employment contracts are not just paperwork – they are legal documents that must strictly comply with employment standards legislation. Here are the key lessons:
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Avoid Conditional Payments: Never make ESA minimum entitlements conditional on the employee signing a release.
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Respect the ESA Standard for Just Cause: Only the most serious misconduct meets the ESA threshold for termination without notice of termination or pay in lieu of notice or severance pay (called wilful misconduct).
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Use Clear and Compliant Language: Ambiguity in an employment contract termination clause will generally be interpreted in favour of the employee. Consult with a trusted Toronto employment lawyer to draft or revise your employment contracts.
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Treat Departing Employees Fairly and Sensitively: How you treat an employee before, during and after a termination matters. Mere oversights or administrative errors, such as delaying an ROE, may result in liability if they are not corrected promptly (especially after an employee raises issues).
What This Means for Employees
If you’ve been terminated – or presented with a questionable employment contract or severance package – this case illustrates why it’s so important to consult a wrongful dismissal lawyer or severance package review lawyer.
Key points for employees:
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You are entitled to ESA minimums regardless of whether you sign a legal release, even if the employment contract termination clause appears to say otherwise. If you feel pressured into giving up your legal rights, speak with an Ontario employment lawyer to review your legal rights and entitlements, especially to review a severance package.
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Unlawful clauses in your employment contract may invalidate the whole termination section, giving you access to greater common law notice (full severance package).
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Employer misconduct after termination of employment – like withholding expenses or delaying ROEs – can lead to additional compensation (called aggravated/moral damages or punitive damages).
A experienced Ontario constructive dismissal lawyer can also help if your working conditions are changed significantly, forcing you to quit.
Final Thoughts
The Wilds decision highlights how important it is to get employment relationships right – both at the beginning and end. Whether you are drafting a new employment contract, or preparing a severance package after a termination of employment, legal compliance must be top of mind.
For employers, the risks of non-compliance are growing, especially with employment contract termination clauses. For employees, it is essential to know your rights and seek legal advice if anything seems off.
If you are unsure about your employment contract or facing a termination, do not navigate it alone. Contact a reputable Toronto employment lawyer to protect your rights and ensure you’re treated fairly – every step of the way.
Call Employment Lawyer Toronto Today
For many employers, termination of employment is a difficult and confusing time, especially when it comes to drafting severance packages. Therefore, in a wrongful termination of employment, it is important for employers to consult with an experienced Ontario employment lawyer for a severance package review to understand the impact of wrongful dismissal on pension plans.
If you are an employer or employee needing to speak with an experienced Ontario wrongful dismissal lawyer to discuss your options and next steps on how to deal with workplace issues, call Bune Law, employment law firm in Toronto. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.