Henshell v. BFN of Ojibways: Ontario Court Clarifies Termination Clauses and Moral Damages
The Ontario Superior Court’s decision in Henshell v. BFN of Ojibways, 2026 ONSC 5768, provides important guidance on the enforceability of employment termination clauses and the circumstances in which a dismissed employee may pursue moral damages.
The decision follows the Ontario Court of Appeal’s recent ruling in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568, which further examined how courts should interpret termination provisions. Together, these decisions illustrate an important development in Ontario employment law: courts continue to require compliance with statutory minimum entitlements, but are placing renewed emphasis on interpreting employment agreements as a whole, rather than invalidating provisions based on isolated words or phrases.
The decision also confirms that an enforceable termination clause does not necessarily prevent an employee from pursuing moral damages. However, such a claim must be supported by specific facts showing that the employer’s conduct in the dismissal process was legally wrongful.
Background: A CEO’s Dismissal After Less Than Three Months
In Henshell, Ms. Henshell (“Henshell”) was employed as Chief Executive Officer of Batchewana First Nation of Ojibways from May 6, 2024, until her dismissal without cause on July 23, 2024.
Henshell alleged that she had been induced to leave an established legal practice by assurances of a secure, long-term leadership position. She further alleged that, after reviewing legal-services retainers, she raised concerns about potentially excessive legal costs and discrepancies in the services being provided. According to her claim, her efforts to address these concerns contributed to her dismissal.
These allegations were not findings that financial misconduct had occurred or that the employer had acted in retaliation. They formed part of the pleaded case considered by the court on a motion to determine the legal sufficiency of the claims.
Henshell sought $350,000 in common law reasonable notice damages, representing 24 months of notice, as well as moral and punitive damages. The employer brought a motion asking the court to enforce the termination provision in the employment agreement and strike claims that did not disclose a legally tenable cause of action.
The Termination Clause Was Enforceable
The central contractual issue was whether the termination provision complied with the Canada Labour Code (“CLC”).
The agreement provided that the employer could terminate employment for a lawful reason by providing the notice, pay and other entitlements required by the CLC, including statutory severance where applicable. It also stated that the employee was not entitled to additional common law notice.
Henshell argued that another provision of the agreement, dealing with confidentiality and workplace policies, created a potential conflict. That provision contemplated severe discipline or termination for cause for breaches of confidentiality policies or procedures. She argued that it could permit termination without the statutory entitlements required by the CLC.
The court rejected that interpretation.
Reading the provisions together, the court concluded that the agreement objectively reflected an intention to provide the employee with the entitlements required by the applicable legislation. The termination provision was therefore enforceable, and Henshell was not entitled to common law reasonable notice damages.
The result illustrates the importance of examining the entire employment agreement. A clause should not necessarily be invalidated because another provision, read in isolation, appears to permit an unlawful outcome. The question is whether the contract, properly interpreted in context, demonstrates an intention to comply with the governing statutory minimums.
For employees, this makes careful review of the entire termination scheme particularly important. For employers, the decision reinforces the value of drafting provisions that work together clearly and preserve all applicable statutory entitlements.
A Shift in Ontario’s Approach to Termination Clauses
The reasoning in Henshell is particularly significant when considered alongside the evolving Ontario case law on termination provisions.
The traditional emphasis on statutory compliance: Wood v. Fred Deeley Imports Ltd.
In Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, the Ontario Court of Appeal invalidated a termination clause that failed to preserve the employer’s statutory obligation to continue benefit contributions during the notice period and did not clearly satisfy its separate obligation to provide statutory severance pay.
The employer had made payments to the employee at termination, but those payments could not cure defects in the contractual wording. The enforceability of the clause depended on what the agreement required, not simply on what the employer ultimately paid.
Wood reflects the protective purpose of employment standards legislation. Employers may contract out of common law reasonable notice, but they cannot contract out of statutory minimum entitlements. Where a termination provision fails to comply with those minimums, the employee may retain the right to common law reasonable notice.
This principle remains important. The more recent cases have not eliminated the requirement for statutory compliance.
The contextual approach: Baker v. Van Dolder’s Home Team Inc.
In Baker, the Court of Appeal clarified the interpretive framework governing termination provisions, addressing conflicting decisions concerning wording such as “at any time” and “for any reason.”
The Court emphasized that employment agreements must be interpreted as a whole, with attention to the words used, the surrounding circumstances and the parties’ objectively ascertainable intentions. The protective purpose of employment legislation remains relevant, but courts should not automatically invalidate a provision because a particular phrase could appear problematic when separated from the rest of the agreement.
In that context, language permitting termination “at any time” does not necessarily express an intention to terminate employees in circumstances prohibited by statute. The question is whether the agreement, read as a whole, reflects an intention to comply with the applicable statutory minimums.
Baker therefore marks a meaningful shift in emphasis from the more literal treatment of certain termination provisions in earlier cases. It does not authorize employers to contract out of statutory protections, nor does it eliminate the principle that a genuinely unlawful termination provision may be unenforceable.
How Henshell applies Baker
In Henshell, the court applied the interpretive framework established in Baker to a different statutory regime. Rather than considering the Ontario ESA, the court examined compliance with the CLC.
The court read the termination provision alongside the confidentiality and discipline provision and concluded that the agreement, considered as a whole, reflected an objective intention to provide all entitlements required by the CLC.
The result highlights the importance of context when interpreting employment agreements. At the same time, Wood and Baker should not be treated as establishing irreconcilable rules. A distinction remains between a clause that actually excludes statutory entitlements and one that, properly interpreted in the context of the entire agreement, does not.
For employees, the practical implication is that potentially problematic wording may not be sufficient, by itself, to invalidate a termination provision. For employers, the decision is not a licence to use broad or imprecise language without regard to statutory obligations. The enforceability of a clause will continue to depend on its wording, the agreement as a whole and the legislation that applies.
For a related discussion of these issues, see Pelsmakher Law’s analysis of the Ontario Court of Appeal’s approach to termination contracts.
An Enforceable Termination Clause Does Not Automatically Defeat Moral Damages
Although the court enforced the termination provision, it separately considered whether Henshell’s claim for moral damages could proceed.
Moral damages may be available where an employer breaches its duty of good faith in the manner of dismissal and causes compensable mental distress. The analysis is distinct from the employee’s entitlement to common law reasonable notice.
The Supreme Court of Canada’s decision in Honda Canada Inc. v. Keays, 2008 SCC 39, and subsequent appellate authority recognize that damages may be available for the manner in which an employer carries out a dismissal, provided the necessary legal and factual requirements are met.
Accordingly, the enforceability of a termination clause does not, by itself, bar a claim for moral damages. An employee may still pursue such damages where the pleaded facts support an actionable claim based on the employer’s conduct during the dismissal process.
However, ordinary disappointment, hurt feelings or the fact of dismissal itself will not ordinarily be enough. The claim must identify facts capable of establishing the relevant breach and resulting harm.
Why the moral damages claim failed
The court concluded that Henshell’s pleaded allegations did not disclose a tenable claim for moral damages.
Among other things, the claim characterized the dismissal as “unceremonious” and alleged that the employer had acted in retaliation for her concerns about legal-service costs. The court found that these allegations, as pleaded, were insufficient to establish the necessary misconduct in the manner of dismissal.
The court also considered the allegation that a councillor involved in the termination decision was the mother of a lawyer whose retainer had been under scrutiny. That allegation, without more, did not establish a legally sufficient claim for moral damages based on the manner of dismissal.
The court distinguished between allegations about why the employer decided to terminate the employee and facts establishing wrongful conduct in how the dismissal was carried out. The alleged reason for the termination, even when characterized as retaliatory, did not automatically establish the latter.
Importantly, the court was not deciding after a trial that the allegations were false. On the motion to strike, the material facts pleaded were assumed to be true for the purpose of assessing whether they disclosed a legally tenable cause of action. The court concluded that they did not.
The decision is a reminder that claims for moral damages require more than a description of an unfair or upsetting termination. Pleadings should identify the conduct said to breach the employer’s obligations and explain how that conduct caused compensable harm.
Repudiation and Punitive Damages
Henshell also argued that the alleged retaliatory dismissal amounted to repudiation of the employment agreement, such that her rights should be governed by the common law.
The court rejected this claim as well. The pleaded conduct fell short of the egregious, toxic behaviour and bad faith actions that may support a finding of repudiation in an employment context. The pleadings also did not establish a clear intention by the parties to cease being bound by the agreement, and Henshell had not alleged constructive dismissal.
The court separately struck the punitive damages claim because the pleadings did not identify an independent actionable wrong capable of supporting that remedy.
The court dismissed the claim in its entirety without leave to amend and fixed costs at $24,500, inclusive of applicable taxes and disbursements.
What the Decision Means for Employees and Employers
Henshell provides several practical lessons.
For employees, the enforceability of a termination clause depends on more than whether individual words appear broad or ambiguous. The entire agreement must be reviewed against the applicable statutory regime. Where a clause is enforceable, common law reasonable notice may be unavailable, but separate claims for moral damages may still be possible if supported by sufficient facts.
Employees who have been dismissed should consider obtaining advice before accepting a termination package or signing a release. The Pelsmakher Law severance calculator can provide an initial estimate of potential entitlements, while the firm’s wrongful dismissal practice page provides further information about dismissal-related claims.
For employers, the decision reinforces the importance of carefully drafted employment agreements. Termination provisions should be clear, internally consistent and designed to preserve all applicable statutory minimums. A contextual approach to interpretation does not eliminate the risk associated with defective wording.
Employers should also recognize that compliance with contractual termination entitlements does not necessarily resolve every issue arising from the dismissal process. Conduct surrounding a termination may give rise to separate claims where the legal requirements are met.
Further information is available on employment contracts and termination provisions and in Pelsmakher Law’s discussion of termination pay, severance pay and reasonable notice in Ontario.
Frequently Asked Questions
Does Henshell mean that termination clauses containing “at any time” are enforceable?
Not automatically. Following Baker, courts must interpret the agreement as a whole and determine whether it reflects an objective intention to comply with the applicable statutory minimums. A clause that actually permits an employer to contract out of those minimums may still be unenforceable.
Can an employee claim moral damages if the termination clause is enforceable?
Yes, potentially. Moral damages concern the employer’s conduct in the manner of dismissal and the resulting harm. They are distinct from common law reasonable notice damages. However, the employee must plead sufficient facts to support the claim.
What is the difference between moral damages and punitive damages?
Moral damages are compensatory. They address harm caused by a breach of the employer’s duty of good faith in the manner of dismissal. Punitive damages serve a different purpose and require an independent actionable wrong, along with the other applicable legal requirements. The two remedies are not interchangeable.
Does Henshell apply to every Ontario employment contract?
The decision interpreted a contract governed by the Canada Labour Code. Its application of Baker is relevant to the broader principles of contractual interpretation, but the statutory regime applicable to a particular employee must be identified before assessing the enforceability of a termination provision.
What should an employee do if a termination clause may be unenforceable?
The entire employment agreement should be reviewed, including any provisions addressing termination for cause, termination without cause, benefits, severance and statutory minimum entitlements. Employees should not assume that a clause is enforceable simply because it appears in a signed agreement, or unenforceable merely because one phrase seems problematic when read in isolation.
Conclusion
Henshell illustrates the importance of interpreting termination provisions in their contractual context while preserving statutory employment protections. Read alongside Wood and Baker, the decision reflects an evolving approach to termination-clause litigation in Ontario, with greater emphasis on the agreement as a whole rather than isolated wording.
The decision also demonstrates that an enforceable termination clause does not necessarily eliminate every potential claim arising from a dismissal. However, claims for moral or punitive damages must be supported by facts that satisfy the applicable legal requirements.
Employees and employers should therefore approach termination provisions with care. Their enforceability and the rights that follow from dismissal depend on the precise contractual language, the governing legislation and the facts of the particular case.
