Canada: Don't Severance Yourself Just Yet

Last Updated: January 20 2017
Article by Stuart Rudner

As my recent First Reference Talks blog post discusses, it appears that the saga of judicial interpretation and consideration of termination clauses will continue, with predictably unpredictable results.

The Default: Reasonable Notice of Dismissal Without Cause

As regular readers will know, the common law provides that in the event of dismissal without cause, employees are entitled to “reasonable notice”. Every case is to be assessed based upon its own particular factors, but the “core” factors are the employee’s length of service, age, position/character of employment, and the availability of similar employment. If the employee was induced to leave or decline other, secure employment, that inducement will also be taken into account. While there are no hard and fast rules with respect to how an individual’s entitlement will be calculated, that entitlement can be substantial, often in the range of a month of notice for every year of service, and sometimes greater.

You Can Contract out of the Common Law Obligation, but...

Our courts have made it clear, however, that parties can contract out of this common law requirement. Courts will enforce termination clauses that limit an individual’s entitlement to notice of dismissal, but the onus will be on the employer to show that the clause should be enforced.

The Contract Must be Enforceable (the Employee must receive Consideration)...

To begin with, an employer seeking to rely upon a termination clause in a contract of employment should ensure that the employee received consideration for their agreement to be bound by the contract. The fairly common practice of having an employee sign a written contract on their first day of employment, or even later, is a surefire way to render the contract worthless. If the individual has arrived for their first day of work, then it stands to reason that they had some sort of agreement in place, presumably a verbal one based upon the matters that were discussed (typically, position, compensation, and other formatters), as well as a number of obligations implied by law. If the employer wants to replace several agreement with the written one they will have to ensure that the employee receives some consideration (something of value) in exchange for that agreement.

The Clause Must Clearly Displace the Common Law, and...

Even if the contract is enforceable, courts will closely scrutinize the wording of any termination clause. To begin with, it must be clear and unambiguous, and there should be no doubt that the individual is giving up any entitlements beyond those set out in the contract. Ambiguous statements along the lines of “you will be entitled to notice of dismissal in accordance with employment standards legislation” will not suffice, as such wording does not clearly explain that the individual will not have additional entitlements beyond the employment standards legislation. As I often advise employers, if you want to be confident in the clause, make it as clear as possible, in plain English. You do not want the employee to be able to credibly state that they did not understand the consequence of agreeing.

The Clause Cannot Breach Employment Standards Legislation...

The other key factor is whether the termination clause breaches applicable employment standards legislation by providing for less than the individual would be entitled to under that legislation. For example, a termination clause that provides for three days of notice of dismissal will not be enforceable, as every jurisdiction requires more notice than that (at least after the probationary period). In recent years, several cases have rejected termination clauses where they did not provide for continuation of employment related benefits, as most employment standards legislation (such as that in Ontario) requires that all benefits continue during the statutory notice period.

Or Even Potentially Breach Employment Standards Legislation

An ongoing debate exists regarding whether a termination clause should be struck out because it could, potentially, breach employment standards legislation. For example, what if the clause provides for 30 days of notice? That would comply with most legislation, at least in the first few years. However, as the individual gains seniority, at some point they will be entitled to more than 30 days. Most of the case law has held that such a clause will not be enforceable. That seems reasonable, as it is clear that if the contract continues, at some point the clause will not comply with legislation.

However, what about the scenario that is unlikely to occur, ever? A good example in Ontario would be Severance Pay. In Ontario, the applicable legislation provides for notice of dismissal or Termination Pay and also for Severance Pay in certain circumstances. Specifically, Severance Pay will be required if the individual is employed for more than five years and the company payroll exceeds $2.5 million. Realistically, some organizations will never have a payroll anywhere near that level. So is it really necessary that their termination clauses provide for the possibility of Severance Pay? According to the latest court decision assessing termination clause, the answer is yes.

The latest word comes from Justice Pattillo of the Divisional Court of Ontario Superior Court of Justice, a case we recently discussed in our posts in the Latest Chapter in Employment Law, and the "Case of the Tempting Bagel". The decision itself was an appeal from the Small Claims Court decision in Garreton v Complete Innovations Inc. In that case, the relevant clause essentially paralleled the Employment Standards Act, 2000, providing as follows


Otherwise Complete Innovations Inc. may at any time terminate this agreement by providing the Employee with (1) one week notice if their duration of continuous employment with the Company is more than 3 months but less than 1 year. (2) weeks prior written notice of intention to terminate if the Employee duration of continuous employment with the Company is more than 1 year but less than (3) years. If the duration of continuous employment with the Company is more than 3 years each additional year will entitle the Employee to (1) one additional week of notice to a maximum of 8 weeks. ... Complete Innovations Inc. shall maintain on your behalf your employee benefits for a period of not less than the period required by applicable statute.

Ms. Garreton was dismissed for cause. The trial Judge found that while there was misconduct, it did not amount to just cause for dismissal. The issue became how much notice she was entitled to and whether the clause above was enforceable. As the Court wrote:

[23] While the termination clause is therefore void and unenforceable for a CI employee of more than 5 years, is it so for Garreton who was an employee of less than 3 years?

[24] Garreton relies on Wright v. The Young and Rubicam Group of Companies (Wunderman)¸ 2011 ONSC 4720 (CanLII). In that case, Low J. found that a notice provision in an employment contract was void for potentially violating the Act.

[25] In that case, as here, the contract provided for the proper notice under the Act given the employee's years of employment but was contrary to the severance provisions in ss.64 and 65.


[27] With the greatest of respect, I disagree with Price J.'s conclusion. In my view, the employment contract must be considered at the time it is executed. If the termination provision is not onside with notice provisions and severance provisions (if applicable) of the Act at the outset, then it is void and unenforceable. Potential violation in the future is sufficient. As Low J. states, "It is not that difficult to draft a clause that complies completely with the Act, no matter the circumstance."

[28] Accordingly, for the above reasons, I find the termination provisions of the Agreement respecting notice to be void and unenforceable. (emphasis added)

While it may seem silly that a small shop with one employee should include provisions for Severance Pay in a contract, the reality is that as the Court wrote, it is not hard to draft a clause that is always compliant. In addition to providing for the possibility of Severance Pay, contracts can and should include a saving provision which states that in the event that the provisions provide for less than applicable legislation, the legislation will prevail and the employee will be entitled to everything required by it.

It is for these reasons that we highly recommend any employers drafting employment contracts to seek our counsel to ensure they are compliant. Employees are also well advised contact us to fully understand their rights prior to signing off on something that contains one of these clauses.

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

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.