Reading the Fine Print Before Signing a Termination Letter

The situation

Dawit had worked as a product coordinator for a mid-sized logistics company in Toronto for a little over four years when his role was eliminated as part of a restructuring. He was called into a video meeting on a Tuesday morning by his manager, Bohdan, told the position no longer existed, and handed a termination letter by email within the hour. The letter offered eight weeks of pay in lieu of notice, continuation of his benefits for that period, and a release for him to sign confirming he would not pursue any further claims against the company.

Dawit's contract classified him as an independent contractor for tax purposes, even though he worked fixed hours, used company equipment, and reported to a manager the same way an employee would. He had also been part of an annual bonus program that paid out every March based on the company's performance and his own review score. His last bonus, paid the previous spring, had come to roughly $9,000. The termination happened in November, four months before the next bonus payment would ordinarily have been calculated and paid.

The letter gave him one week to sign the release and return it. He had not yet signed anything when he came to us, but he was under real pressure — the offer stated that the eight weeks of pay would only be provided if the release was signed, and he needed the money. A colleague let go in the same round, Hanna, had already signed and returned her own release the same afternoon it arrived, without asking anyone to look it over first.

What the review found

The first question was not about the bonus at all — it was about whether Dawit was really a contractor. Ontario's Employment Standards Act, 2000 looks at the real substance of a working relationship, not the label in a contract. Someone who works set hours, follows a supervisor's direction, uses the company's tools, and has no ability to send someone else to do the job in their place is generally an employee for the purposes of termination entitlements, whatever the paperwork calls them. On the facts Dawit described, he had a strong case that he was properly an employee, which meant he was entitled to more than the bare statutory minimums the letter assumed applied to a contractor — he could also claim reasonable notice at common law, calculated based on factors like his length of service, age, and role.

The bonus was the second issue, and the more time-sensitive one. His original agreement described the bonus as tied to company performance and an annual review cycle, with no language excluding it during a notice period or after termination. Ontario courts have consistently held that when a bonus is an integral part of an employee's compensation — something paid regularly and relied upon, rather than a discretionary one-off gift — the employee generally remains entitled to it for the period covered by their notice entitlement, unless the employment contract contains clear and unambiguous wording taking that right away. Dawit's contract had no such wording. The termination letter he had been sent, however, made no mention of the bonus at all. Left as written, signing the release would likely have been read as accepting the eight weeks of pay as full and final compensation — silently giving up a bonus claim that, prorated for the period between termination and the following March, was worth a meaningful amount on top of the notice pay already offered.

There was also a mechanical problem with the release itself: it asked Dawit to confirm he had no other claims against the company, full stop, with no carve-out preserving his right to raise the bonus later. Once signed, that kind of broad release is very difficult to unwind.

What we did

1. Held the signature. Before anything else, we advised Dawit not to sign or return the release while the letter's one-week deadline was still running. A termination offer can typically be responded to with a short, reasonable extension request, and companies expect employees to take time to get advice — reflexively signing to avoid missing a deadline is one of the most common ways severance value gets left on the table.
2. Confirmed the bonus was contractual, not discretionary. We reviewed the original agreement and the company's own bonus program description, both of which described the payment in terms tied to defined performance metrics and a set annual timeline, rather than as a gift given entirely at management's discretion. That distinction mattered: discretionary bonuses are harder to claim after termination, while structured, recurring bonuses tied to performance criteria are treated much more like regular compensation.
3. Sent a written response setting out the gap. Rather than filing anything in court, we wrote to the company's HR contact identifying two issues: the misclassification as a contractor, and the release's silence on the bonus. We asked for the bonus to be addressed explicitly, either through a prorated payment or express language preserving Dawit's right to claim it, before any release was signed.
4. Negotiated the added terms into the letter. The company's position was that letters like this were sent as a template and the omission was not intentional. After some back-and-forth, they agreed to add a prorated bonus payment to the termination package, calculated for the months Dawit had worked toward the annual cycle before his role ended, rather than leave the point open to later dispute.
5. Reviewed the revised release before Dawit signed anything. Once the bonus term was added and the notice period entitlement was reconsidered in light of his likely employee status, we reviewed the full revised letter with Dawit so he understood exactly what he was releasing and what he was being paid for, before he put his name on it.

The outcome

The company revised its offer to include a prorated bonus payment of roughly $6,500, reflecting the portion of the annual cycle Dawit had already worked before his termination, on top of the original eight weeks of pay in lieu of notice. Combined, the adjustment added a meaningful amount to what he would have received under the original letter — money that would have simply disappeared into a signed release had he sent it back the day it arrived. The company also agreed to a short additional payment reflecting the stronger position his likely employee status gave him on notice, though it stopped well short of what a full common-law notice claim might have produced through litigation, since Dawit preferred a quick, certain resolution over a drawn-out dispute.

Nothing about this outcome required a lawsuit or even a formal demand letter with a threatened claim attached. The entire result came from reading the original contract and the bonus program terms carefully, and pointing out — calmly and in writing — exactly what the termination letter had left out. That is often enough. Employers drafting standard termination letters are not always trying to shortchange a departing employee; they are frequently working from a template that was not built with that particular employee's compensation structure in mind. The problem was caught and corrected before Dawit gave anything away, which is a very different position than trying to claw back a bonus after a broad release has already been signed.

What you can learn from this