If you are an employer in Ontario or anywhere across Canada, recent legal developments make one thing clear: it is high time to review employment contracts,
particularly the termination clauses. Otherwise, you may be exposing your business to costly workplace disputes, including wrongful dismissal claims and constructive dismissal claims.
A series of court decisions in Ontario has dramatically reshaped how employment termination clauses are interpreted. Most notably, the Waksdale v. Swegon North America Inc. decision and the more recent Dufault v. The Corporation of the Township of Ignace case have made it increasingly difficult for employers to rely on poorly drafted or non-compliant termination language in employment contracts.
Whether you’re an HR professional, business owner, or senior manager, this article will walk you through what these cases mean, why they matter, and what you should be doing now. Working with a qualified Toronto employment lawyer or employment contract review lawyer could make all the difference in protecting your organization.
Termination Clauses: Why They Matter
When a business hires an employee, the employment contract often includes a termination clause that outlines what happens if the employee is let go. These clauses typically limit what the employee is entitled to upon dismissal – sometimes to just the minimum notice or severance under the Ontario Employment Standards Act, 2000.
But here’s the catch: if any part of the termination language fails to comply with the Employment Standards Act, courts may strike down the entire clause. This means the employee could be entitled to common law reasonable notice, which can be much more expensive – sometimes amounting to months of salary and benefits.
A Game-Changer: Waksdale v. Swegon
In 2020, the Ontario Court of Appeal issued a groundbreaking ruling in Waksdale v. Swegon North America Inc. In that case, the court found that even if the employer did not rely on a problematic “for cause” termination clause, the entire termination provision was unenforceable because that entire clause violated the Employment Standards Act.
This decision set off alarm bells for employers. It meant that a seemingly minor issue in one part of the contract could render the entire termination section invalid – even if the employee was dismissed without cause and that specific “for cause” language wasn’t used.
Since then, many employers have struggled to draft enforceable contracts and properly negotiate severance packages.
Fast Forward to 2024: Dufault v. Ignace
The legal risk for employers only intensified with the more recent decision in Dufault v. The Corporation of the Township of Ignace, confirmed by the higher court in late 2024.
What Happened?
The employer terminated the employee without cause and provided the minimum entitlements under the Employment Standards Act, as outlined in the employment contract. The employee challenged the enforceability of the termination clause, claiming it violated the Employment Standards Act.
The Ontario court agreed with the employee in the wrongful dismissal claim – and the higher court later refused to overturn the decision.
Here’s why the court found the termination clauses unenforceable:
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“For Cause” Clause Too Broad
The contract included a separate “for cause” clause that exceeded the Employment Standards Act’s definition. Under the Employment Standards Act, termination without notice is only allowed for “wilful misconduct” or similar serious behavior. But the contract referred to the broader common law standard, which is more lenient toward employers. That misalignment violated the Employment Standards Act. -
Limited Severance to Base Salary Only
The “without cause” provision restricted severance payments to just the employee’s base salary, omitting other regular wages like vacation pay, benefits, or bonuses. That’s another Employment Standards Act violation. -
Unlawful Employer Discretion
The contract gave the employer sole discretion to terminate the employee “at any time,” potentially overriding Employment Standards Act protections – such as rules preventing termination after returning from protected leaves or during reprisal claims. This language gave the employer too much power, which the court found to be unenforceable and contrary to employee rights.
What Makes This Case Stand Out?
The third reason – the employer’s absolute discretion to terminate – was a novel legal interpretation, highlighting that courts are now scrutinizing termination language more aggressively than ever before.
Court Reaffirms Waksdale in Dufault Appeal
When the case reached the Court of Appeal, the court upheld the lower decision and confirmed that the entire termination provision could be invalid if any part contradicts the Employment Standards Act.
This means employers can no longer rely on partial compliance. If any clause related to termination breaches the Employment Standards Act – even indirectly – it can void the entire section.
Why Employers Need to Act Now
The implications of these rulings are significant. If a termination clause is ruled invalid:
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The employee becomes entitled to common law reasonable notice
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That reasonable notice of termination (or amount of financial severance package compensation) can range from a few months to over a year, depending on age, role, and length of service
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Employers face larger severance obligations, which could strain budgets or lead to lawsuits
The solution? Employers must review employment contracts at the workplace with a legal professional.
How a Toronto Employment Lawyer Can Help
Working with an experienced Toronto employment lawyer or employment contract review lawyer can help you avoid costly legal disputes. These professionals will:
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review employment contracts currently in use at the workplace
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Ensure every clause complies with the Employment Standards Act and recent case law
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Help renegotiate contracts with existing employees, providing “fresh consideration” like bonuses or raises to make amendments legally binding
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Offer support when you need to negotiate a severance package or conduct a severance package review
This employment legal expertise is especially valuable if your business has multiple employees on old or templated contracts that have not been updated in years.
For Employees: What This Means for You
If you are an employee who was recently let go from your job and received a termination letter, it is essential to have your severance package reviewed by a wrongful dismissal lawyer in Toronto.
Many termination clauses can be challenged under the same logic used in Waksdale and Dufault. If your employer used an invalid clause, you could be owed significantly more compensation than what was initially offered.
A qualified Ontario employment lawyer can help you:
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Analyze your employment contract
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Determine whether the termination clause is legally valid and enforceable
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Negotiate a better severance package in the event of termination of employment
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File a wrongful dismissal claim if needed
Final Thoughts: Do Not Wait to Take Action
The legal landscape around employment contracts in Ontario has shifted, and employers can no longer rely on outdated or boilerplate termination clauses. The risks of ignoring these changes are too high – and preventable with the right support.
Whether you’re an employer looking to protect your business or an employee wanting to know your rights, the time to act is now.
If you’re unsure whether your contracts comply with the Employment Standards Act or recent court decisions, consult a trusted Toronto employment lawyer today. A proactive approach can save thousands of dollars and avoid legal headaches down the road.
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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