Is Your Ontario Termination Clause Enforceable?

This article is for informational purposes only and does not constitute legal advice. Every legal situation is unique — consult a licensed lawyer before making any legal decisions.

Your Termination Clause May Be Worth More Than You Think

If your Ontario employment contract has a termination clause, it may not limit your rights the way you think it does. Most people sign employment contracts when they start a new job without examining the termination section closely — it looks standard, it references the law, and it feels official. For years, that assumption was often reasonable. Since 2020, it has become far less so.

Ontario courts have scrutinized and invalidated termination clauses at an unprecedented rate over the past five years. A single phrase — one that many employers have been using for decades — can now be enough to void an entire termination provision and open the door to a much larger severance entitlement. If you have just received a termination notice, or if you are reviewing a new offer, understanding your clause is one of the most financially consequential things you can do before you sign anything.

This article covers employees governed by Ontario’s Employment Standards Act, 2000. Employees in federally regulated industries such as banking, airlines, and telecommunications may have different entitlements under the Canada Labour Code. If you are unsure which applies to you, an Ontario employment lawyer can help you determine your coverage.

Identify Your Situation — Pick Your Path

What Makes a Termination Clause Enforceable in Ontario

The Employment Standards Act, 2000 (ESA) — Ontario’s workplace rights statute — sets a mandatory floor for what employees must receive when their employment ends without cause. This floor cannot be waived, negotiated away, or contracted out of. A termination clause can legally limit your entitlements to the ESA minimum, but it cannot go below it under any circumstances.

There are two separate entitlements to understand. The first is termination pay (Part XV of the ESA): a payment equal to one week’s notice per year of service, up to a maximum of eight weeks, either as advance notice or as pay in lieu of notice. The second is severance pay (Part XVI of the ESA): a separate and additional payment of up to 26 weeks’ regular wages, available only from employers whose total Ontario payroll is $2.5 million or more, or who are terminating 50 or more employees within a six-month period. These are not the same thing, and a clause that silently excludes one while addressing the other may be unenforceable.

The most important case shaping this area is Waksdale v. Swegon North America Inc., a 2020 decision from the Ontario Court of Appeal. The court held that if any part of a termination provision violates the ESA — including a “for cause” section that was never invoked — the entire termination clause is void. You cannot sever the bad part and keep the good part. The whole provision falls together.

ESA Minimums vs. Common Law Notice — The Gap That Matters

Common law reasonable notice — the entitlement that applies when no valid termination clause exists — is the amount of advance notice or pay that courts have established employees are typically owed based on their individual circumstances. It is determined by what courts call the Bardal factors, named after the 1960 Ontario case that established the framework: your age, your length of service, the character and seniority of your position, and the availability of comparable employment in your field.

A practical illustration: an employee with seven years of service in a mid-level position may be entitled to seven weeks of notice or pay under a valid ESA clause. If that same clause is found void, a court may award seven to ten months of notice at common law — depending on age, seniority, and the job market. The difference can run to tens of thousands of dollars. For longer-service or more senior employees, the gap can be significantly wider.

The Language Courts Have Struck Down — and Why

“At any time” and “sole discretion” language

Courts have found that language allowing the employer to terminate employment “at any time” and “at the employer’s sole discretion” may be unenforceable. The reasoning is that this wording could permit termination during an ESA-protected leave — such as a pregnancy leave or a sick leave — which the ESA prohibits. In Dufault v. The Corporation of the Township of Ignace (2024 ONSC), the court voided a clause containing both phrases. Baker v. Van Dolder’s Home Team Inc. (2025 ONSC) extended this to “at any time” language even without the “sole discretion” qualifier.

However, this area of law remains unsettled. In Li v. Wayfair Canada Inc. (2025 ONSC) and Jones v. Strides Toronto (2025 ONSC), different courts reached different conclusions about “at any time” language where the rest of the clause was otherwise ESA-compliant. The Baker decision is currently under appeal, and a ruling from the Ontario Court of Appeal is expected to provide further clarity. This divergence means that a legal review of your specific contract wording is advisable — no blanket rule currently applies.

Overly broad just-cause definitions

The ESA permits dismissal without notice only where an employee is guilty of wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and has not been condoned. This is a higher and more specific standard than the common law concept of “just cause.” Termination clauses that define cause more broadly — for example, including poor performance, breach of company policy, or a general list of conduct — may be void because they could deprive an employee of ESA notice in circumstances where the ESA would still require it. Under the Waksdale rule, this defective for-cause section can void the entire termination clause, including the without-cause section.

Clauses that omit severance pay or benefits

A termination clause that addresses notice but says nothing about severance pay, or that appears to exclude continuation of benefits during the notice period, may also be found unenforceable. Courts have held that a clause must account for all components of the ESA entitlement — not just the most visible ones. It is worth noting, however, that a well-drafted clause that clearly and unambiguously limits entitlements to ESA minimums in all circumstances can still be enforceable. In Bertsch v. Datastealth Inc. (2025 ONCA), the Ontario Court of Appeal upheld a termination clause precisely because it was clear, unambiguous, and left no room for a below-ESA outcome.

Step-by-Step: What to Do After You Receive a Termination Notice

1. 1
   Do not sign the release immediately

   You are not legally required to sign on the spot or even within days. Most employers allow several weeks. Signing a release typically extinguishes your right to claim anything beyond what was offered, so take the full time available to you before making that decision.

2. 2
   Find your original signed employment contract

   Locate the copy you received when you started the job. If you do not have a physical copy, check your email from your start date. If you cannot locate it, you may be able to request a copy from your employer — though they are not always obligated to provide one after the fact.

3. 3
   Identify the termination clause and flag key language

   Find the section dealing with termination. Note whether it contains phrases like “at any time,” “sole discretion,” or a list of conduct that can result in dismissal without notice. Also check whether the clause mentions severance pay separately from notice, and whether it says anything about benefits during the notice period.

4. 4
   Calculate your ESA minimum entitlements

   Using the Ministry of Labour’s guide, calculate the minimum termination pay and, if applicable, severance pay you may be entitled to based on your years of service. This gives you a floor to compare against what was offered. If the offer is below your ESA minimum, that is a separate violation regardless of any contractual clause.

5. 5
   Consult an employment lawyer before the release deadline

   A lawyer can review your specific clause, assess whether it may be unenforceable, estimate your common law entitlement if it is, and advise on whether negotiation or a formal claim may be worthwhile. You can book a consultation with Nihang Law at any stage of this process — including if you have already received a package.

6. 6
   Understand your duty to mitigate

   Even if you are pursuing common law reasonable notice, Ontario law requires you to actively look for comparable employment during the notice period. This is called the duty to mitigate. Failing to make reasonable efforts to find work can reduce the notice a court awards. Keep records of your job search activities from the date of termination.

Common Mistakes Ontario Employees Make With Termination Clauses

• Signing the release before getting legal advice. Once signed, a release is almost always final. Many employees sign within days of termination, before they have had a chance to determine whether the clause limiting their entitlement was even valid in the first place.
• Assuming a signed contract is always binding. Employees often believe that because they signed the contract, every clause in it is enforceable. In Ontario, a contract cannot override the ESA — and courts regularly set aside termination clauses, regardless of when or how clearly they were signed.
• Confusing termination pay with severance pay. These are two distinct statutory entitlements. Receiving one does not mean you have received the other. If your employer had a payroll above $2.5 million and you had at least five years of service, you may be entitled to severance pay on top of termination pay.
• Not checking the for-cause section after a without-cause termination. Because of the Waksdale rule, a defective for-cause provision can void the entire termination clause — even if you were dismissed without cause. Many employees (and some employers) do not realize the for-cause language is relevant when a without-cause termination has occurred.
• Neglecting the duty to mitigate while waiting on a legal outcome. If you are pursuing a common law claim, you must still be actively seeking comparable work. Stopping your job search while waiting for a settlement or ruling can reduce the amount you ultimately receive.
• Assuming a “saving clause” protects you automatically. Some contracts include language stating that the termination clause should be read to comply with the ESA. Ontario courts have generally found that this language does not cure an otherwise defective clause — it does not substitute for properly drafted terms throughout.
• Newcomers assuming Canadian employment contracts always fully protect them. If you are new to Ontario, your employment contract may have been drafted years ago and never updated to reflect significant changes in the law since 2020. The ESA protects you regardless of your immigration status — but you need to know your rights to claim them.

A Note for Newcomers and GTA Workers New to Ontario Employment Law

One of the most important things to understand about employment in Canada is that your signed contract is not the final word on your rights. Ontario’s Employment Standards Act, 2000 sets minimum protections that apply to virtually every provincially regulated employee — regardless of what your contract says, regardless of your immigration status, and regardless of what you were told when you accepted the offer.

Many newcomers to the GTA accept boilerplate employment contracts that have not been reviewed or updated since before the major legal shifts of 2020 and beyond. These contracts may contain termination language that was once considered standard but can no longer withstand judicial scrutiny. If you signed your contract several years ago — or even recently, with a smaller employer — the clause limiting your severance may not be enforceable.

Qasim Ali, Principal Lawyer at Nihang Law, regularly advises GTA newcomers, internationally trained professionals, and first-time employees navigating Ontario’s employment law landscape. Understanding what your contract actually provides — and what it cannot take away — is where that conversation often begins.

Frequently Asked Questions — Termination Clauses in Ontario

Protecting Your Rights Starts Before You Sign

Ontario’s employment law has changed significantly since 2020, and the courts continue to work through important questions about what termination language is and is not acceptable. One thing is consistent: a single defective phrase can void an entire termination provision, and a just-terminated employee should never assume the severance offer in front of them is the ceiling of what they may be owed. The same applies to employees reviewing a new contract — the language you accept today determines your options if the relationship ends tomorrow.

Whether you have a severance package in hand, a new contract to review, or simply a question about what your current agreement actually says, understanding your rights is the right place to start.

This article is for informational purposes only and does not constitute legal advice. Every legal situation is unique — consult a licensed lawyer before making any legal decisions. Nihang Law Professional Corporation is regulated by the Law Society of Ontario.