Enforceability of termination clauses and the latest blow to employers in Ontario, Canada

The Canadian courts, in particular the courts in the province of Ontario, generally dislike termination clauses which seek to limit an employee’s termination entitlement to the statutory minimums. If a termination provision is ambiguous or provides the employee with less than their entitlements under employment standards legislation, then the clause will be unenforceable, and the employee will receive reasonable notice at common law.

In June 2020, the Court of Appeal for Ontario in Waksdale v. Swegon North America Inc. determined that if any part of the employer’s termination scheme is unenforceable, then the entire termination scheme will be void and the common law will apply. Previously, the courts had held that only the offending portion(s) would be unenforceable, while the remaining separate and distinct provisions would remain in force. For example, if the employer’s termination for just cause (with a valid legal reason) provisions are found to be unenforceable, then the termination without cause provisions would also be unenforceable, even if the without-cause provisions would have otherwise been enforceable on their own, and even if the employee was terminated without cause.

It is therefore especially important for Canadian employers to consult with a lawyer to determine whether their current termination language should be amended to ensure that it is compliant with the Waksdale decision.