Defending a Wrongful Dismissal Claim Worth $620,000

The situation

Kavya and Winston co-own a mid-sized accounting and financial advisory firm in Mississauga, built up over more than a decade from a two-person practice into a firm employing several dozen accountants and consultants. Three years earlier, they had hired Donovan as a senior practice consultant to lead the firm's corporate advisory division, offering him a generous salary, an annual discretionary bonus, and a written employment agreement that both partners had assembled themselves from a template they found online and lightly edited to fit the role.

The relationship worked well for a while, but the advisory division underperformed against its targets for two consecutive years, and Kavya and Winston made the decision to eliminate Donovan's role as part of a broader restructuring. They gave him several weeks of working notice and a modest severance package calculated on his base salary alone, believing the employment agreement's termination clause limited their obligations to that amount. Within a month, they received a demand letter from a lawyer acting for Donovan, alleging the termination clause was unenforceable and that he was entitled to common law reasonable notice instead — a claim valued at roughly $620,000 once his salary, historical bonus averages, and benefits continuation were factored in over what his lawyer argued would be a reasonable notice period given his age, seniority, and specialized role.

The legal problem

In Ontario, when an employer ends an employee's job without cause, the employee is entitled to notice of termination, or pay instead of notice. The Employment Standards Act, 2000 sets out minimum notice and severance requirements based on length of service — these are the floor, not the ceiling, and an employer cannot contract below them. Absent an enforceable written agreement that says otherwise, however, the default is common law: courts imply a right to "reasonable notice," a much larger entitlement calculated by factors including the employee's age, length of service, seniority, and how easily they could find comparable work. For a senior, specialized consultant in his fifties with three years of service, a court could reasonably award many months of notice — and that notice period is usually costed using the employee's full compensation, including bonuses that were a regular part of their pay.

An employer can avoid this open-ended common law exposure only with a written termination clause that clearly and validly limits the employee's entitlement to something less — typically the statutory minimums, or a fixed formula. But Ontario courts read these clauses strictly against the employer that drafted them. If a termination clause is ambiguous, tries to contract out of any statutory minimum entitlement (even one that would never actually apply to that employee), or fails to address entitlements like benefits continuation during the statutory notice period, courts have shown a strong willingness to strike the whole clause down and default back to common law reasonable notice instead. The stakes are asymmetric: a small drafting flaw in the termination clause can turn a five-figure severance obligation into a six-figure one.

The firm's template-based agreement had exactly this vulnerability. Its termination clause purported to cap Donovan's entitlement at his statutory minimums, but the surrounding language was inconsistent — one paragraph referenced "just cause" grounds using wording that arguably went further than what the Employment Standards Act permits, and another was silent on whether benefits would continue during the notice period. Donovan's lawyer seized on both gaps, arguing the clause was unenforceable as a whole and that reasonable notice — and the far larger number that came with it — should apply.

What we did

1. Reviewed the agreement Donovan actually signed, not just the template. Our team requested the fully executed copy, the signing history, and any earlier drafts exchanged during his hiring. Termination clauses are sometimes altered between drafts and never properly re-signed, which can create its own enforceability problems — we needed to know precisely what document was in force before assessing whether it would hold up.
2. Assessed the clause on its actual wording, provision by provision. Rather than treating the demand letter's broad claim that the clause was "unenforceable" as settled, we worked through each paragraph against the current state of Ontario law on termination clauses — separating the parts that were genuinely vulnerable from the parts Donovan's lawyer was reading more aggressively than the wording supported. The benefits-continuation silence was a real gap. The just-cause language, on closer reading, did not actually purport to remove any statutory entitlement — it was inartfully worded, not unlawful.
3. Built the defence around severability and the specific facts of the termination. Because Donovan's role was eliminated without cause, the just-cause paragraph he was leaning on had never actually been triggered and was not truly in issue on these facts. We argued the enforceable without-cause termination provision could stand on its own, and quantified the benefits-continuation gap precisely — it added a modest, calculable amount to what the firm owed, not the wholesale collapse into common law notice Donovan's lawyer was seeking.
4. Opened settlement discussions early, backed by that analysis. Litigating a wrongful dismissal claim through to trial in the Superior Court can take well over a year and cost both sides heavily in legal fees, regardless of who is ultimately right. Once we had a defensible position on the enforceability question, we shared our reasoning with Donovan's lawyer directly, rather than letting the case grind toward examinations for discovery on a claim we believed was substantially overstated.
5. Negotiated a resolution anchored to the enforceable clause, not the common law claim. The final settlement reflected the statutory minimum entitlements the clause was designed to provide, plus the benefits-continuation amount we had already identified as a genuine gap, plus a modest additional sum to close the file without further legal costs on either side.
6. Rebuilt the firm's employment agreement template from the ground up. With the Donovan matter resolved, we worked with Kavya and Winston to replace their template entirely — drafting a termination clause that clearly limits entitlements to the statutory minimums, explicitly addresses benefits continuation, and separates the without-cause and just-cause provisions so a problem in one no longer threatens the other.

The outcome

The claim resolved for roughly $45,000 — the statutory minimum termination pay Donovan's three years of service entitled him to under the Employment Standards Act, plus a calculated amount for the benefits gap and a negotiated sum to close the matter without further cost. That is a small fraction of the roughly $620,000 his lawyer had initially demanded on a common law reasonable notice theory, and it came without the year-plus of litigation, examinations for discovery, and legal fees that a contested trial would have required from a firm of Kavya and Winston's size.

The outcome turned entirely on the enforceability of the without-cause termination clause. Had that clause been struck down in its entirety — a real risk given the genuine ambiguity in the benefits language — the firm would likely have been facing an award many multiples higher, calculated on Donovan's full compensation including bonus history over a common law notice period that could plausibly have run to a year or more. The specific, narrow flaw in the old agreement made that outcome avoidable rather than inevitable, but only because the flaw was isolated and argued precisely rather than conceded wholesale.

Since the settlement, every new employee at the firm has signed the rebuilt agreement, and Kavya and Winston asked our team to review it again eighteen months later against updated case law, since court decisions on termination clause enforceability continue to evolve and a clause that holds up today is not guaranteed to hold up indefinitely.

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