Termination clauses are a cornerstone of any employment agreement. A well-drafted termination clause can limit an employee's entitlements on dismissal to the minimum standards under the Employment Standards Act, 2000 (ESA), helping avoid the higher costs of common law reasonable notice.
But here is the catch: even the most carefully written clause can fail. Ontario courts are strict about wording and employer conduct. Clauses that are short, clear, and directly reference the ESA tend to stand up over time. However, one misstep in how a termination clause, or the termination itself, is handled can unravel the entire clause.
This blog provides a breakdown of two important Ontario decisions regarding termination clauses and employer termination conduct. In the first case (Bertsch), the clause was upheld by the Court of Appeal for Ontario, despite the clause being relatively lengthy, which rarely happens. In the second case (Perretta), the employer's behaviour voided the agreement altogether, but the court upheld an important part of the termination clause, which is a portion of the decision that has not received much attention.
A Clause That Worked: Bertsch v. Datastealth Inc.
In Bertsch v. Datastealth Inc., 2025 ONCA 379 ("Bertsch"), the Ontario Court of Appeal (ONCA) confirmed that a termination clause limiting an employee's entitlements to ESA minimums was valid and enforceable.
Facts:
Mr. Bertsch, a Vice President with just under nine months of
service, was dismissed and given four weeks' pay, in line with
the ESA. His employment agreement had a detailed
termination clause confirming that on termination, he would receive
only what the ESA required, including any minimums for
notice, severance, benefits, and so on. It also clearly stated that
he would not be entitled to common law notice.
What happened:
Mr. Bertsch sued, arguing the clause was ambiguous and potentially
allowed termination without pay for less serious conduct (that is,
below the ESA threshold of "wilful misconduct"). He
argued this made the clause unenforceable.
Court result:
The Court rejected his arguments. Both the Superior Court and the
Court of Appeal for Ontario found that:
- The clause was unambiguous.
- It did not suggest the employer could avoid payments in non-wilful misconduct situations.
- There was no reasonable interpretation that conflicted with the ESA.
The Court also dismissed the idea that a clause could be struck down simply because a non-lawyer might misread it. What matters is how the clause would be reasonably interpreted, not whether someone might misunderstand it.
Notably, the termination clause was not the longest clause we have seen, but it was far longer than the standard short and succinct clauses usually upheld by the courts as valid. The termination clause in Bertsch was crafted very well, and it being upheld by the highest court in Ontario is generally viewed as a large win for employers throughout the province.
A Clause That Could Have Worked: Perretta v. Rand A Technology Corp.
In contrast, Perretta v. Rand A Technology Corp., 2021 ONSC 2111 ("Perretta"), shows how employer conduct is crucial when attempting to rely on a termination provision. Additionally, I argue that Perretta has a very important, yet often overlooked, paragraph which can be quite helpful to employers who are attempting to validate a simple "just cause" termination provision.
Facts:
Ms. Perretta had a contract that allowed the company to terminate
her with ESA minimums plus an extra two
weeks' notice or pay. When she was dismissed after 5.5 years,
the employer offered only the ESA minimums — and
made the two-week top-up conditional on her signing a release.
What happened:
She challenged the condition, and the employer eventually reversed
course, apologized, and paid the extra two weeks. However, the
Court found the damage had already been done.
The court ruled that by conditioning part of her contractual entitlement on signing a release, the employer had fundamentally altered the agreement. This amounted to a repudiation of the contract, meaning it was no longer enforceable.
The Court then awarded her common law reasonable notice: six months, instead of just seven weeks.
Important Aspect:
Even if the contract had not been repudiated, the Court found that
the just cause language in the agreement would still have rendered
the clause unenforceable because it did not properly align with the
ESA.
The just cause termination clause in Perretta read as follows:
"Termination With Cause – We may terminate your employment for just cause at any time without notice, pay in lieu of notice, severance pay, or other liability, subject to the ESA. For the purposes of this Agreement, "just cause" means just cause as that term is understood under the common law and includes, but is not limited to: [list of Eleven Categories of Just Cause]"
The clause ultimately failed due to three out of the eleven categories of "just cause" potentially not meeting the higher threshold of "wilful misconduct" and because the "subject to ESA" language was in the sentence prior to the listing of offending provisions, making the clause ambiguous. This is not the first time a clause has failed for these reasons, and it will not be the last.
However, the court found that an important portion of the clause would have been valid, notwithstanding the offending portions of the clause and the employer's repudiatory conduct. Notably, paragraph 53 of the decision states as follows:
"[53] I accept Rand's submission that, considering the entirety of the 2018 Employment Contract and the Termination With Cause Provision as a whole, there is a way that the Termination With Cause Provision can be read that is compatible with the ESA. The words "subject to the ESA" would have to be found to disqualify or neutralize the Offending Categories of Just Cause".
In short, this portion of the decision states that drafting in the language of "subject to the ESA" can save a just cause provision, which removes entitlements entirely upon termination and does not clearly outline the higher "wilful misconduct" threshold when doing so. The court here is stating that the language of "subject to the ESA" implies the "wilful misconduct" standard into the clause.
This is not the first time a court has upheld the "subject to the ESA" language. However, from my understanding, this is the first and only time a court has done so in the context of a "just cause" provision.
Overall, in Perretta, if the just cause clause was simpler and did not list multiple categories of "just cause", the court would have likely upheld it as valid. The court, in substance, upheld the following portion of the clause:
"Termination With Cause – We may terminate your employment for just cause at any time without notice, pay in lieu of notice, severance pay, or other liability, subject to the ESA..."
Of course, since the release of the trial and appellate decisions, in Dufault v. Ignace (Township) (post-Perretta), the "at any time" language in the above provision would likely require removal.
Final Thoughts for Employers
If you are an HR professional or business owner managing employment contracts:
- Write simple clauses. Limit entitlements clearly to the ESA and use plain language.
- Avoid over-complication. Courts do not reward legalese or over-drafting. The more words, the more opportunities to fail.
- Follow the contract. Do not introduce new conditions upon termination – abide by the contractual language.
Conclusion
Termination clauses can save employers substantial money, but only if they are both clear and properly followed. A short, well-drafted clause that clearly ties entitlements to the ESA is more likely to survive a legal challenge. However, employer conduct at the time of termination remains just as critical. Keep it simple and follow through on what the contract says.
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.
