It has long been established that employees without a valid
termination clause in a written employment agreement are entitled
to "common law" reasonable notice of termination, or pay
in lieu thereof.
Since common law principles will often result in lengthy notice
periods for employees, well in excess of their minimum entitlement
under the Employment Standards Act, 2000 (the
"ESA"), many employers will attempt to
limit their exposure by including termination clauses in their
These termination clauses will sometimes limit the employee to
only the minimum amounts under the ESA, or sometimes provide a
little more than the ESA minimum, but still less than the
employee's common law entitlement to reasonable notice.
While it is certainly possible to have an enforceable
termination clause, the law in this area changes from time to time
and courts have shown a willingness to strike down termination
clauses, and thereby award pay in lieu of reasonable notice based
upon common law principles to employees, wherever possible.
The court's fairly recent decision in Stevens v. Sifton
Properties Ltd. highlights this risk and reinforces the need
for employers to have their employment agreements reviewed by
counsel from time to time to ensure that their termination clause
remains enforceable as the law evolves.
In Stevens v. Sifton Properties Ltd., the employer had
a fairly common termination clause in its standard employment
agreement which allowed for termination of employment upon payment
of only ESA minimum notice (or pay in lieu of notice) and severance
pay and also included language which said that the employee
accepted those amounts in satisfaction of all claims against the
This type of clause was previously thought to be enforceable,
but the court in Stevens disagreed and found the clause
unenforceable because it did not specifically mandate the
continuation of benefits during the notice period, which is
required by the ESA.
In the Stevens case, the employer actually continued
the employee's benefits. However, since the employment
agreement did not specifically mandate the continuation of
benefits, and included the clause which said that the employee
accepted the payments set out in the agreement in full satisfaction
of all claims, the court held that the employment contract violated
the ESA (since the employer could have theoretically relied upon it
and not continued benefits) and was, therefore, unenforceable.
As a result of this decision (and similar decisions in recent
years) employees with these types of unenforceable termination
clauses in their employment contracts will be entitled to
reasonable common law notice instead of the ESA minimum amounts.
Depending on an employee's length of service and other factors,
this can represent significantly increased liability for
Given that the law in this area continues to evolve, employers
are wise to review their standard employment contracts regularly
and make changes as necessary to ensure that the termination
provisions are enforceable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).