- Ontario law now prohibits most non-competition clauses in employment agreements, with narrow exceptions such as certain senior executives and clauses tied to the sale of a business.
- Any clause — not just a termination clause — that attempts to give an employee less than the Employment Standards Act, 2000 guarantees is generally void to the extent of that shortfall.
- A fixed-term contract can be a useful tool, but it carries a serious drafting trap: if the contract doesn't include an enforceable clause permitting early termination, an employer who…
Ontario employers have heard, correctly, that termination clauses get struck down often. What gets far less attention is that termination language isn't the only part of an employment contract that regularly fails. A handful of other clauses show up in template after template — copied from an old contract, downloaded from a generic source, or borrowed from a business in another province — and each one carries its own risk of being unenforceable when it actually matters.
An unenforceable employment contract clause doesn't just fail to protect the employer. In some cases, an invalid clause can make it harder to argue the rest of the contract, including other provisions the employer was relying on, should be read the way it was written.
Non-Competition Clauses
Ontario law now prohibits most non-competition clauses in employment agreements, with narrow exceptions such as certain senior executives and clauses tied to the sale of a business. A generic non-compete lifted from an old template and applied to an ordinary employee is very likely unenforceable outright — and including one can create needless friction with a new hire who has it reviewed. A non-solicitation clause (restricting solicitation of clients or staff) is a different tool and is generally treated far more favourably, provided it's reasonable in scope and duration.
Clauses That Try to Contract Below the ESA Floor
Any clause — not just a termination clause — that attempts to give an employee less than the Employment Standards Act, 2000 guarantees is generally void to the extent of that shortfall. This shows up in places employers don't expect:
- Overtime language that assumes a salaried employee is automatically exempt, regardless of actual duties
- Vacation or public holiday provisions that quietly understate the statutory minimum
- Leave-of-absence language that omits a job-protected leave the ESA requires
The ESA operates as a floor, not a template. A contract can offer more than the minimum; it cannot offer less.
Fixed-Term Contracts Without an Early-Termination Provision
A fixed-term contract can be a useful tool, but it carries a serious drafting trap: if the contract doesn't include an enforceable clause permitting early termination, an employer who ends the relationship before the term expires may owe the employee compensation for the entire remaining term of the contract — not just ESA or common-law notice. This risk grows with every year left on the term, and it is one of the more expensive drafting oversights an employer can make.
Unilateral Variation Clauses
Some contracts include language letting the employer change any term "at its sole discretion" without the employee's agreement. Courts have generally treated this kind of broad, one-sided language with skepticism, particularly where it purports to reach fundamental terms like compensation or job duties. A change to a genuinely fundamental term of employment usually still requires the employee's agreement (often supported by fresh consideration) to be enforceable.
Overreaching Entire Agreement Clauses
An "entire agreement" clause is meant to confirm that the written contract is the whole deal — useful for keeping out stray verbal promises. Problems arise when the clause is drafted (or later relied on) to try to override statutory rights the employee cannot waive, such as ESA minimums. A clause cannot contract around statutory protections simply by declaring itself the final word.
Comparison: Why These Clauses Fail
| Clause type | Why it commonly fails | Better approach |
|---|---|---|
| Broad non-competition clause | Generally prohibited outside narrow exceptions | Use a properly scoped non-solicitation clause instead |
| Clause under the ESA minimum | Void to the extent it falls short of the statutory floor | Confirm the clause meets or exceeds current ESA minimums |
| Fixed-term without early exit | Can trigger liability for the full remaining term | Include a clear, enforceable early-termination provision |
| Unrestricted unilateral variation | Skepticism from courts on fundamental-term changes | Require written agreement for material changes |
| Overreaching entire agreement clause | Cannot waive non-waivable statutory rights | Draft narrowly around prior representations, not statutory rights |
Frequently asked questions
If one clause is struck down, does the whole contract fail?
Not necessarily. Courts often sever an unenforceable clause and enforce the rest of the contract, but this depends heavily on the specific wording and how the clauses interact — it's not something to assume will happen in your favour.
Can I still use a non-solicitation clause to protect client relationships?
Generally yes. Non-solicitation clauses are treated differently from non-competition clauses and remain a common, more defensible tool — provided they're reasonable in scope, geography, and duration for the role in question.
Is it enough to just update my termination clause and leave the rest of the contract alone?
Not if the rest of the contract has its own problems. A refreshed termination clause sitting inside a contract with an unenforceable non-compete or a below-ESA vacation provision still leaves real exposure elsewhere.
How often should employment contract templates be reviewed?
Given how frequently Ontario courts revisit contract wording in employment cases, a periodic review — not a one-time drafting exercise — is the safer approach for any employer using a standard template across multiple hires.
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