Without a written contract, an Ontario employee you dismiss is owed common-law reasonable notice, which can run to many months of pay. A valid termination clause caps that. One badly drafted sentence voids the entire clause. Contracts drafted and reviewed for a flat $1,128.87, taxes included.
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With no enforceable written agreement, the common law implies a term that you will give reasonable notice before dismissing someone without cause. Courts assess it on the employee's age, length of service, the character of the position and how hard comparable work is to find. In practice it often lands near a month per year of service, and at the top end approaches two years.
The Employment Standards Act, 2000 minimums are much smaller: one week of notice per completed year of service to a maximum of eight weeks, plus severance pay in defined circumstances. A properly drafted termination clause limits the employee to those minimums, or to a stated formula above them. That one clause is usually worth more than everything else in the document combined.
You cannot contract out of the ESA. A term that gives an employee less than the Act is void and the Act applies instead. Where the contract gives more than the Act, the greater right prevails.
Ontario courts read termination provisions as a package. In Waksdale v Swegon North America the Court of Appeal held that if any part of the termination language breaches the ESA, the whole termination scheme is unenforceable, even where the employer relies on a different and perfectly compliant part, and even where the contract contains a severability clause.
The usual culprit is the just cause wording. Contracts commonly say the employer may dismiss for cause without notice. The ESA only allows notice to be withheld in a narrower situation set by regulation, involving wilful misconduct that is not trivial and has not been condoned. A clause using the ordinary common-law cause standard therefore promises less than the Act, and takes the rest of the clause down with it.
Other failure points recur: clauses that cut off benefit continuation during the statutory notice period; clauses that ignore ESA severance pay; clauses letting the employer terminate "at any time" or in its "sole discretion", which courts have found sit awkwardly with the ESA's protection against dismissal during a protected leave or as a reprisal; and fixed caps that the ESA will eventually exceed as service accrues.
The consequence is not a small correction. A voided clause means the employee gets common-law reasonable notice, which is exactly what the contract existed to prevent.
The contract has to be given before employment starts. If someone accepts a job, starts work, and is then asked to sign an agreement containing a termination clause, that agreement is generally unenforceable for want of fresh consideration, because continued employment is not enough. Present the full agreement with the offer letter, allow real time to read it and take advice, and have it signed before the first day.
The same applies to people already on staff. To put an enforceable contract in front of a current employee you must give something of value they were not already entitled to, such as a signing bonus, a raise or a promotion, and the documents have to record that it was given in exchange for signing.
Beyond termination: an ESA-compliant probationary period; an express right to lay off temporarily, without which any layoff is a constructive dismissal; how and when compensation can change; bonus entitlement on termination, which after the Supreme Court's decision in Matthews v Ocean Nutrition must be removed in unambiguous language if you do not want it payable through the notice period; confidentiality; intellectual property assignment; and non-solicitation.
Non-competition clauses have been prohibited by the ESA for most Ontario employees since October 2021. Narrow exceptions exist for executives and in the sale of a business. Putting a general non-compete in an ordinary employment contract achieves nothing and invites the argument that the rest of the document was drafted carelessly too.
Employers with 25 or more employees also carry standing ESA policy obligations: a written policy on electronic monitoring and a written policy on disconnecting from work. And since 1 January 2026, publicly advertised job postings must state expected compensation or a range, disclose any use of artificial intelligence to screen applicants, say whether the posting is for an existing vacancy, and avoid any Canadian work experience requirement. Interviewed candidates must be told within 45 days whether a decision was made, and postings and related records kept for three years.
Probably not. Termination clause law in Ontario has moved substantially since 2020, and clauses that were standard then are routinely struck down now, particularly the just cause wording. The test is not whether the contract has ever been challenged, it is what happens the first time it is. Have the termination provisions reviewed and re-paper going forward with proper consideration.
Yes, but you have to give them something for it. Continued employment is not consideration in Ontario. A raise, a bonus, a promotion or a genuine new benefit will work, provided it is given in exchange for signing and the documents say so. Give real time to review and to take independent advice as well, because pressure at the signing table is another route to unenforceability.
For most employees, no. The ESA prohibits them, with narrow exceptions for executives and for sellers of a business who stay on as employees. Non-solicitation clauses are still available and are what most employers actually need. Protecting customer and staff relationships for a reasonable period and in a reasonable scope is usually enforceable where a blanket non-compete is not.
Not if the working relationship is really employment. The ESA prohibits misclassifying an employee as a contractor, and the CRA, WSIB and the courts each apply their own tests based on control, ownership of tools, chance of profit, risk of loss and integration into the business. The label in the agreement is one factor among many. Getting it wrong means back-dated ESA entitlements, source deductions, interest and penalties.
Less than most employers assume. Probation is a contractual idea, not a statutory one. Under the ESA no notice is required in the first three months of employment regardless of what the contract says, so any probationary period running beyond three months still has to comply with the Act. A probation clause is worth having because it sets a clear, lower standard for assessing suitability early on, but it does not create a rights-free window.
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