For employers, the termination clause is the single most valuable provision in an employment contract. Done right, it caps your severance exposure at the statutory minimums. Done wrong, it collapses entirely, and you’re back to paying full common law reasonable notice, which can be many times higher.

Why this clause carries so much weight

Without an enforceable termination clause, a dismissed employee’s entitlement defaults to the common law. For a long-tenured or senior employee, that can mean many months of pay. A properly drafted clause can limit that exposure to ESA minimums. The gap between the two is often the difference between a manageable cost and a serious liability.

The all-or-nothing problem

Here’s what catches many employers off guard: Ontario courts treat termination provisions as a package. If any part of the termination language violates the Employment Standards Act, 2000 (the “ESA”), even a “for cause” provision you never expected to rely on, the entire termination clause can be struck down. And a severability clause (i.e., a clause intending to strike out any inadvertent unlawful provisions from a contract) generally won’t save it.

The practical result: one poorly worded sentence, buried in a clause you thought was airtight, can void your whole severance cap. Courts have repeatedly done exactly this.

Common ways termination clauses fail

  • Language that could pay less than the ESA minimum in some scenario, even a hypothetical one
  • “For cause” wording that sets a lower standard than the ESA’s “wilful misconduct” test
  • Failing to continue benefits during the statutory notice period
  • Old contracts that were never updated as the law evolved
  • Templates pulled from another jurisdiction or the internet, never reviewed for Ontario

Any one of these can be enough to unravel the clause.

The update most employers skip

Even a clause that was valid when it was signed can become unenforceable as case law shifts. And if an employee was promoted years ago without a refreshed contract, the old agreement may no longer reflect, or bind, the current relationship. Contracts are not a set-and-forget document.

A cheap fix for an expensive risk

Having your employment templates reviewed is a fraction of the cost of a single wrongful dismissal claim built on a void clause. If your contracts haven’t been looked at recently, or you’re not certain they’d survive scrutiny, that’s worth addressing before your next termination, not after.

Get in touch for a consultation and we’ll help you assess whether your termination clauses would hold up to scrutiny.