Employers, it’s time to put down the white flag. All hope is not lost when it comes to the enforceability of employment contracts.
Employment contracts are living instruments that require continual tuning to stay legally sound. For years, courts have made it exceedingly difficult to craft a contract that will hold up to scrutiny in court. However, when a contract withstands the scrutiny of the court, the case becomes instrumental in drafting employment contracts, and therefore, in protecting your business.
Evolving Legal Standards and Employment Contracts
Employment contracts are meant to provide clarity for both employers and employees. Their rights and obligations, including compensation, scheduling, and termination, must be clearly set out, understood by both parties, and (most importantly) compliant with the Employment Standards Act (“ESA”). Barring unique circumstances, ambiguous contracts will be interpreted in favour of the employee.
Clarity regarding termination means including clear language about what happens if either party wants to end the working relationship, either by resignation or termination. This includes voluntary resignation, temporary layoffs (which may or may not end the relationship), or termination with or without cause.
Termination clauses limit an employer’s financial exposure to a terminated employee. Absent clear and ESA compliant provisions, employees are eligible to claim what is called ‘common law notice,’. Common law notice is almost invariably significantly more than the minimum notice required pursuant to the ESA. For older, senior-level employees, this can amount to 2 years’ pay or even more after a termination depending upon certain factors.
Employers can protect themselves from this financial burden by including language in their employment contracts that limits employees to minimum entitlements allowed under the ESA. So why are these contracts so slippery and not static?
Courts have imposed strict standards regarding the clarity and precision required for termination provisions in an ESA compliant employment contract. Falling below this standard results in void provisions that open the floodgates of common law notice. Termination clauses that provide greater notice than the statutory minimums may be void for lack of precision. Termination clauses that provide less than statutory minimums are void for noncompliance. In both instances common law notice would apply.
The challenge for lawyers is that the courts do not provide a clear road map, and writing a valid contract is not as simple as a ‘plug and play’ formula. Contracts should be reviewed annually, because language that may have worked one year may be ruled invalid by a case even just a few months later.
However, every so often the Court will rule that a contract’s language is perfectly valid, as it did recently in one Ontario courtroom.
When an Employment Contract Works
In the recent case of Bertsch v. Datastealth Inc.(2025 ONSC 379), a senior-level employee was dismissed after less than 9 months of service, and filed a claim for wrongful dismissal. The termination provision in his contract read as follows:
Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the Ontario Employment Standards Act, 2000 and its Regulations, as may be amended from time to time (the “ESA”), including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
Additionally
If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time, you shall instead receive your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time.
This contract is interesting for a few reasons. It spells out very clearly that an employee who is terminated with or without cause will be entitled to all of their minimum allowances at law, which include wages, benefits, termination and severance pay – all of which are guaranteed to employees under the ESA except in the most extreme circumstances. The contract also includes a catch-all in that final section that nothing less than the ESA minimums will be provided.
What the contract also does clearly is limit the employee from collecting anything further, using language such as “provided with only the minimum payments,” and that the minimum “satisfies any common law or contractual entitlement.” There is even further language to clarify that if the employee’s role changes at all, and no matter how long they work there, this language still applies.
The employee had appealed to the Court of Appeal, with their lawyer arguing that there was potential ambiguity in the agreement, but the Court of Appeal disagreed. The Court ruled that not only does the contract use plain language in this instance, but it is very clear in how it limits the employee’s entitlements while still upholding their rights under the law. Thus, the employee’s claim for further damages was dismissed.
Final thoughts
So, what can we learn from this decision? When it can seem like lawyers are trying to figure out exactly what language will ensure a contract can be valid, cases like these provide some clarity.
Working with an employment lawyer ensures that you’re working with a knowledgeable expert who is aware of the ever-changing case law. Our employment lawyers keep note of the new decisions, we understand the contractual nuances and we know how to respond to protect your business. Just as you wouldn’t skip your annual health check-up, reviewing your employment contracts every year is essential to ensure they remain enforceable and aligned with evolving laws and business realities. We help to mitigate your risk, which may lead to saving a lot of money in the long run when having to part ways with an employee. Contact us today to learn more about our employment law services.