The Notice Clause That Failed, and the Payout That Still Fell Short

The situation

Kenneth had worked at a Chatham warehouse for just over five years, moving up from picking orders to running a section of the floor, earning about $900 a week. He was called into the office on a Tuesday morning and told the position was being eliminated as part of a restructuring. His manager, Arman, handed him a letter confirming the termination and a cheque for five weeks' pay, which the letter described as full satisfaction of everything Kenneth was owed under his employment contract.

At home, the timing was tight. His wife, Reza, worked as a hairdresser on a commission basis, and the household budget depended on both incomes landing every month. Kenneth read through the termination letter and the original employment contract he had signed on his first day, and the wording of the notice clause seemed to match what he had been paid: it said that on termination without cause, he would receive notice or pay in lieu equal to the minimum required under the Employment Standards Act, 2000, Ontario's baseline law setting minimum notice, severance and other protections for employees. Five weeks looked, at a glance, like exactly what the clause promised. He came to us mainly to have the letter checked before signing anything releasing further claims.

The legal problem

A termination clause in an employment contract can validly limit an employee to the legislated minimums instead of the more generous notice a court would otherwise award. But to do that, the clause has to be drafted carefully, and courts read them strictly against the employer, because the employee had far less bargaining power when signing it. If any part of a termination clause tries to give the employee less than the legislation requires, in any circumstance the clause could apply to, courts have consistently held that the whole clause fails, not just the offending piece — leaving the employee entitled to reasonable notice at common law instead, which is often considerably longer.

Reviewing Kenneth's contract, two problems stood out. First, the clause defined the employer's right to terminate for cause more broadly than the Employment Standards Act, 2000 permits, potentially allowing the employer to deny Kenneth even the statutory minimums in situations where the law would still require them. Second, the clause was silent on benefit continuation during the notice period, and the Employment Standards Act, 2000 requires an employer to keep an employee's benefits running throughout their statutory notice period, not just pay out wages. A clause that does not guarantee that is treated the same as one that tries to take it away.

Either flaw on its own is generally enough. Together, they made the clause unenforceable, and courts do not enforce even the parts an employer got right; if the language fails, the whole clause is set aside. That meant Kenneth was not limited to the five weeks the letter offered. He was entitled to reasonable notice under the common law instead, calculated by looking at factors including how long he had worked there, his age, his position, and how readily someone in his role could expect to find comparable work. For a five-year employee in his mid-forties in a specialized warehouse role in a smaller labour market like Chatham's, that pointed to something in the range of four to five months, not five weeks.

What we did

1. Confirmed the clause's defects in writing before advising Kenneth on his options. We set out, in a demand letter to the employer, exactly why the termination clause was unenforceable — the overly broad cause language and the missing benefit continuation guarantee — with reference to the governing statute, so the position was on the record early rather than raised for the first time in a claim.
2. Calculated what reasonable notice was actually worth. At roughly $900 a week, a notice period toward the higher end of the likely range worked out to about $18,900 in total pay and benefits, against the $4,500 already paid. That gap — nearly $14,400 — was the real value of getting the clause struck down, and it is what made this worth pursuing formally rather than accepting the cheque.
3. Explained the duty to mitigate before Kenneth started applying for jobs. Ontario law requires a dismissed employee to make reasonable efforts to find comparable new work during the notice period. It is not optional, and it is not about looking generous — any earnings from a new job during that period are deducted from what the former employer owes, because the notice period is meant to bridge someone to their next income, not to pay out a fixed sum regardless of what happens next. We told Kenneth this plainly and encouraged him to search in parallel with the claim, rather than wait for it to resolve.
4. Filed the claim in Small Claims Court once informal resolution stalled. The employer's position, through its own representative, was that the five weeks paid was sufficient and that pursuing more would not be worth the cost. We disagreed, and given the size of the gap, filed a claim in Small Claims Court, the branch of Ontario's court system built for smaller monetary disputes with simplified procedures.
5. Tracked Kenneth's job search and earnings carefully once he was re-employed. Kenneth found a new warehouse role after about nine weeks of searching, at a slightly lower wage of roughly $850 a week. We documented the search effort and the new pay rate, because both would matter directly to the final calculation — evidence of a genuine search protects the claim, and the new wage determines exactly how much gets deducted.

The outcome

The employer did not contest that the clause was unenforceable once the demand letter set out the specific defects; that argument was strong on its face, and few employers litigate a losing legal point on principle. The dispute instead came down to the mitigation math, which is where Kenneth's payout ended up much closer to the floor of what was possible than the ceiling.

Of the roughly sixteen weeks of notice pay still owed after the initial $4,500 was credited, Kenneth was unemployed for the first nine weeks, entitling him to full pay for that stretch — about $8,100. For the remaining seven weeks of the notice period, he was earning $850 at his new job against the $900 he used to make, a shortfall of $50 a week, adding roughly $350 more. The claim settled for about $8,450 in addition to what he had already received, reflecting that calculation closely enough that going to trial over the difference was not worth the added cost and delay to either side.

Kenneth's reaction, once the numbers were explained, was mixed. He had understood in principle that the clause was invalid and that he was, on paper, entitled to something close to $18,900. Seeing the actual payout land under $9,000 once his own re-employment was subtracted was a harder pill, even though it was the legally correct outcome and even though finding work quickly was clearly the right call for his household regardless of the claim. The lesson was not that pursuing the claim was a mistake — the $4,500 he had already been paid would have been all he ever received without it, and the additional $8,450 was real money his family needed. The lesson was that the size of a notice period on paper and the size of an eventual payout are two different numbers, and the gap between them grows every week a dismissed employee is out of work before finding something new.

What you can learn from this