Ontario's highest court has confirmed that employment
contract provisions that will breach the Employment Standards
Act ('ESA') in the future are void and
unenforceable.1 The Court has also confirmed that
fixed-term employees who are terminated under an unenforceable
termination clause are entitled to the salary they would have
earned had they worked their entire fixed term.
In Covenoho, the employee had a one year fixed-term
contract with the employer. After being employed less than three
months, the employee was dismissed without notice or payment in
lieu thereof. A lower court found that because the employee had not
worked the prerequisite three months for statutory notice, the
employee was not entitled to any notice and was validly
The Court of Appeal found issue with the terms of the employment
agreement, namely that the termination provisions allowed the
employer to terminate the employee without cause or notice. One of
the provisions required no notice for dismissal and the other
specified that the employer will have "no liability to [the
employee], save and except to pay any accrued and earned
Although the ESA allows an employer to dismiss an
employee without notice if they have not completed three months of
employment, the Court of Appeal found that the contractual
provisions must be construed as if the employee's employment
continued beyond three months. The Court found that if a
"provision potentially violates the ESA at any date
after hiring, it is void."
If the termination provision is void, common law termination
applies. The Court found that in the absence of an enforceable
termination provisions with notice, an employee with a fixed term
contract is entitled to the full salary they would have earned
under the contract had they worked it to completion. The salary
received is not subject to mitigation.
The employee was entitled to $56,000 in damages, which was the
40 weeks of salary that remained on the contract.
Employers in Ontario should take particular care to ensure that
their termination provisions are enforceable as common law notice
and common law remedies for fixed term contract breaches can be
significant. Furthermore, employers should ensure their contracts
are "future-proof" by considering the statutory notice
periods and ensuring their contracts do not provide for shorter
notice than required by statute.
1. Covenoho v. Pendylum Ltd., 2017 ONCA
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