Your Termination Clause Might Not Survive a Challenge: What a Toronto Employment Lawyer Checks First

Two weeks of pay or six months of pay can hinge on a single paragraph that nobody has reread since the offer letter went out. That was roughly the gap in one of Ontario’s most cited dismissal cases, and the employer lost it. Many companies still use contract templates written years before the courts tightened the rules. When a Toronto employment lawyer opens one of those files, the review usually starts in the same few places.

This post walks through those places in the order a Toronto employment lawyer typically checks them. It is written mainly for employers who want to know whether their contracts will hold. Employees who have just been let go may find it useful too, since the same wording decides what they are owed.

Why Ontario Courts Strike Down Termination Clauses So Often

Start with the rule that sits under everything else. An employment contract in Ontario cannot give an employee less than the Employment Standards Act, 2000 guarantees. A clause that tries to go below that floor is void.

When a termination clause fails, the employee usually becomes entitled to common law reasonable notice. That amount is often far larger than the statutory minimum.

The Waksdale case shows the gap. Swegon North America dismissed Benjamin Waksdale without cause after eight months and paid him two weeks in place of notice under his contract. He sued for six months instead.

Check One: The “For Cause” Wording in the Termination Clause

Here is where many employers get caught off guard. Most lawyers look at the for-cause section first, even when the employer dismissed the employee without cause.

In Waksdale, the Ontario Court of Appeal held that termination provisions must be read as a whole. If one part breaches the ESA, the whole set of termination provisions falls, even when the employer never relied on the faulty part. The Supreme Court of Canada refused to hear the employer’s appeal on January 14, 2021, so the ruling stands.

What does a for-cause clause usually get wrong? Mostly, it sets the bar too low. The ESA lets an employer deny statutory termination pay only in narrow cases of wilful misconduct. Common law covers more ground.

A clause that strips all notice for any “cause” can overshoot the ESA. The Court of Appeal confirmed this again in Dufault v. Ignace (Township) in December 2024. It upheld a finding that a clause defined cause more broadly than the ESA’s wilful misconduct threshold.

A lawyer reading your for-cause wording will usually ask:

• Does it remove all notice for conduct that falls short of wilful misconduct?
• Does it list minor failings, such as lateness or poor performance, as grounds for losing everything?
• Does any other clause, such as a probation or resignation clause, cut into ESA rights?

Check Two: “At Any Time” and “Sole Discretion” Language

Then comes the phrase that has worried employers the most since 2024.

In the Superior Court decision in Dufault, the judge found that allowing termination at the employer’s “sole discretion” and “at any time” breached the ESA. The reasoning was that the ESA bars an employer from terminating someone returning from a protected leave or for reprising ESA rights. So employers never have unlimited discretion.

The Court of Appeal did not revisit that finding. It decided the case on the for-cause wording alone.

Where does that leave things now? Honestly, the answer is unclear. Some 2025 decisions went further and struck down “at any time” wording on its own, while other judges upheld similar language in otherwise compliant clauses. Perhaps the safer reading is that this wording now invites a fight, even if it does not always lose one.

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Check Three: What the Clause Promises on the Way Out

Next, a lawyer looks at what the clause actually promises when employment ends. A clause can meet the notice minimum on paper and still fall short somewhere else.

The review usually covers these points:

• Does it promise at least the ESA minimum notice or pay in lieu?
• Does it account for statutory severance pay where the employee may qualify?
• Does it keep benefits running for the statutory notice period?
• Does it cap pay in a way that could drop below the minimum for a longer-serving employee?

Some of these problems stay hidden for years. A clause that works fine for a two-year employee can fail for the same person at year nine.

Keeping Your Employment Contracts Current in Ontario

Termination clauses rarely fail because someone drafted them carelessly. More often, the law moved, and the template stayed put.

If your company’s contracts predate 2020, a full review makes sense before the next dismissal, not after. Read the Ontario government’s guide to the Employment Standards Act on termination and severance. Then have your termination, probation and resignation wording reviewed together by a lawyer experienced in Ontario employment contracts.