To deem a termination clause unenforceable, it must explicitly state an intention to deviate from the Employment Standards Act (“ESA”). Employers are advised to seek legal counsel before drafting employment contracts and regularly review them to minimize the risk of facing common law reasonable notice obligations.
A termination clause in an employment contract can be deemed unenforceable for several reasons under Ontario law, including but not limited to:
- Violation of Minimum Standards: If the clause fails to meet or provide for the minimum statutory rights as outlined in the Employment Standards Act, 2000 (ESA), it may be considered unenforceable. This includes provisions for notice, severance, and other entitlements upon termination.
- Ambiguity or Lack of Clarity: Termination clauses that are vague, ambiguous, or not clearly written can be interpreted in favor of the employee, leading to the clause being unenforceable.
- All-Inclusive Language: Clauses that attempt to limit an employee’s entitlements to only what is provided in the ESA, without clearly stating that the employee will receive at least the minimum standards under the ESA, may be unenforceable.
- Incorporating Illegal Terms: If any part of the termination clause violates the ESA or other relevant laws, the entire clause (and potentially other related clauses) may become unenforceable. This was highlighted in the case of Waksdale v. Swegon North America Inc., where the Ontario Court of Appeal ruled that if any termination provision in the employment agreement is illegal, the entire termination provision (including parts that might otherwise be legal) is unenforceable.
- Lack of Consideration for Changes: If an existing employee is asked to agree to a new or revised termination clause without adequate consideration (something of value in exchange for agreeing to the new terms), the clause may be unenforceable.
It’s crucial for employers and employees to ensure that termination clauses are drafted clearly, comply with all legal requirements, and are updated as necessary to reflect changes in the law or employment circumstances. Legal advice should be sought to ensure the enforceability of such clauses.
For employees, we strongly encourage you to reach out if your position was terminated or if you have concerns in relation to an offer of employment and its termination clauses. Contact Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or via email at mlahert@sultanlawyers.com.