Ontario 2025 Employment Changes in Hiring and Terminations – Part Two

In this second of a two-part series, we continue to review the new employment law changes in Ontario in 2025 and the latest changes in firing practices. To promote transparency and fairness, this blog will discuss the new termination provisions by citing the Dufault v Ignace case and outlining the best practices for employers.

New Termination Provisions

While legislative changes focus on hiring practices, a few recent court decisions have begun to shape the termination processes in employment agreements.

Dufault v Ignace (Township) in the enforcement of termination clauses 

This case viewed the importance of employment agreements and the added termination provisions. The Court reviewed the Agreement and contemplated continuing the employment relationship for two years. The employer ended the employment relationship three weeks into the term, relying on the Agreement’s early termination provisions.

However, the Courts ruled that ‘for cause’ and ‘without cause’ provisions in a fixed-term employment contract are unenforceable and invalid. As a result, the Courts determined that the plaintiff was entitled to damages equivalent to the balance owing under the plaintiff’s contract.

‘For Cause’ Provision 

In invalidating the “for cause” provision, the Court reviewed the termination provision wrongfully, which allowed the employer to terminate the employee for conduct that may fall short of the ESA’s “wilful misconduct” standard without paying the employee their minimum statutory entitlements.

The employment agreement stated:  

4.01 The Township may terminate this Agreement and terminate the Employee’s employment at any time and without notice or pay in lieu of notice for cause.

However, the employer will recall that there is no “cause” provision in the ESA and employers will only be able to forego provision of statutory minimum entitlements, including termination pay and severance pay, if the employee is guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been conducted by the employer”. Therefore, the Court viewed this provision as an issue with the vagueness that constitutes “cause.”

‘Without Cause’ Provision 

The Court also took issue with the qualification of remuneration under the “without cause” termination provision and the discretionary portion that allowed the employer to terminate without cause at its “sole discretion.”

The Agreement read as follows:

4.02 The Township may at its sole discretion and without cause, terminate this Agreement and the Employee’s employment thereunder at any time upon giving to the Employee written notice as follows: (i) the Township will continue to pay the Employee’s base salary for a period of two (2) weeks per full year of service to a maximum payment of four (4) months or the period required by the Employment Standards Act, 2000 whichever is greater…

The Court viewed that only providing the employee’s base salary during the statutory notice period violated the ESA, which requires continuing “regular wages.” The Court held that the absence of reference to “regular wages, “vacation pay, and contractually provided paid sick time invalidated this provision for falling short of ESA minimum standards.

Following this, the Court also viewed and held that the provision’s references to being able to terminate the employee at the employer’s “sole discretion” and “at any time” breached sections 53 (reinstatement after protected leave) and 74 (reprisal for exercising a right under the ESA) of the ESA, which articulate instances where the employer could be limited in its “discretion” to terminate an employee at any time.

The Court emphasized that if termination clauses do not comply with the ESA when the employment agreement is signed, compliance at termination will not remedy the error. This decision reinforced the importance of transparent and compliant language in employment contracts, especially regarding termination clauses.

Best Practices for Employers

Employers will have to review new legislation and ensure their Agreements follow the ESA. To navigate these changes, employers can consider the following;

• Ensure all employment Agreements follow the ESA
• Develop new hiring processes for new hires starting July 1, 2025
• Ensure all employees involved in the onboarding team are up to date with new requirements
• Implement new systems that can retain job postings for three years
• Implement new processes that can ensure AI usage is not inadvertently discriminating against protected groups

Takeaways

It is important to stay current on the new changes in Ontario in 2025, and employers should assess and review their employment agreements to ensure they do not violate any terms of the ESA and promote transparent language in termination clauses.

If you would like to discuss the above policy updates further or believe your employer is not complying with these new policies, we encourage you to reach out to employment lawyers Toronto, Sultan Lawyers PC. You can contact us online or by phone at 416-214-5111. We are here to assist you.