Can My Employer Make My Severance Conditional on Non-Disparagement, Confidentiality and Cooperation? An Ontario Executive's Guide

Can my employer make my severance conditional on non-disparagement, confidentiality and cooperation?

Yes for the enhanced part of the package, no for the statutory floor. Your employer can offer more than the law requires in exchange for a release, a promise not to disparage the company, confidentiality and a duty to cooperate. It cannot make your Employment Standards Act minimums depend on any of those things. Refusing to sign is never a reason to pay you nothing.

Think of an executive package in three layers. The bottom layer is the ESA floor. It is owed whether or not you sign anything. The middle layer is your contract. It is whatever your employment agreement and plan documents give you, if their termination provisions are enforceable. The top layer is common law reasonable notice. You are owed it if those provisions are not enforceable: Machtinger v. HOJ Industries Ltd., [1992] 1 SCR 986 holds that an invalid termination clause falls away and the presumption of reasonable notice comes back. The conditions in a separation agreement are what the employer asks for in exchange for settling the gap between its offer and what you could recover at the top layer. They are never the price of the bottom layer.

It also helps to separate obligations you already have from obligations the employer is trying to buy. Most executives already have to keep company information confidential under their employment agreement, their equity plan and the duties the law places on senior people who handle confidential information. Almost nobody already owes a duty not to criticize the company after leaving, or to spend unpaid days helping it defend lawsuits. Those are new promises, and a new promise binds you only if you agree to it. In Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, forfeiture amendments the employees refused to sign never became part of their contracts. The employer has to pay for new promises, and you are entitled to negotiate what they say.

• Lawful conditions of an enhanced package: a full and final release; confidentiality of the settlement terms; a non-disparagement clause; reasonable help with the transition and with litigation; return of company property; resignation from directorships and officer roles; a reasonable non-solicitation covenant.
• Lawful conditions of the statutory amounts: none. ESA termination pay, benefit plan contributions for the statutory notice period, ESA severance pay and final wages are owed whether or not you sign.
• Terms you should strike whatever you are paid: a promise to give evidence that suits the company rather than the truth, a promise not to give information to an employment standards officer, and a promise not to speak to a regulator or law enforcement.

First, check which law applies to you. If your employer is federally regulated (a bank, a telecommunications carrier, an airline, an interprovincial trucking or rail company), the ESA does not apply at all; the Canada Labour Code does. Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 explains how that federal regime replaces dismissal on notice for the employees it covers. The rest of this article is written for executives of provincially regulated employers. See federally regulated employee rights.

Why can't a release or non-disparagement clause take away my ESA minimums?

Because s. 5 of the Employment Standards Act, 2000 says so. To the extent a separation agreement trades your statutory entitlements for your silence, your confidentiality or your cooperation, it is void. Both subsections of s. 5 matter to an executive, because the second one is how employers try to get around the first.

• Section 5(1), the ban. 'No employer or agent of an employer and no employee or agent of an employee shall contract out of or waive an employment standard and any such contracting out or waiver is void.' It binds both sides and their agents, including your own lawyer. You cannot sign away the floor even if you want to. Seniority does not change that: Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 held that an executive's sophistication and independent legal advice do not save a termination clause that breaches the ESA.
• Section 5(2), the greater benefit exception. If contract terms 'that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard', the contract applies and the standard does not. This is how an employer defends a package: six months of pay is a greater benefit than eight weeks of termination pay, so the contract governs.

The weakness in the s. 5(2) argument is the condition. Suppose the package beats the floor only as long as you never breach a non-disparagement clause, and the whole package can be clawed back if you do. That is not reliably a greater benefit on the subject of termination pay, because on a bad day it gives you less than the statute. The safer drafting, and the drafting you should insist on, pays the ESA amounts without conditions and on time, and makes only the excess depend on the release. Any clawback, liquidated damages or 'return the package' remedy should expressly exclude the statutory amounts. Employers' lawyers usually accept this: a remedy that reaches the statutory amounts is void to that extent under s. 5(1) and invites a fight over the rest of the agreement.

Section 5 also gives you leverage on your original contract. If its termination clause breaches the Act anywhere, it may not limit you to the statutory amounts at all. Your baseline then becomes reasonable notice, and the offer should be measured against that. See whether your termination clause is enforceable.

What do sections 60 and 61 make my employer pay no matter what I sign?

They require the employer either to give you working notice on unchanged terms or to pay a lump sum equal to what that notice would have produced. In both cases it must keep your benefit plans funded for the statutory notice period. For an employee with eight or more years of service, that period is eight weeks (the scale of weeks is set in a separate provision of the Act not reproduced here).

Section 60 governs the notice period itself. Each limb matters:

• s. 60(1)(a): during the notice period the employer 'shall not reduce the employee's wage rate or alter any other term or condition of employment.' On its plain words, the employer cannot use working notice to impose new terms, such as a fresh non-disparagement undertaking, as a condition of continuing to pay you. This limb also reaches equity. Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 was released in August 2026, so it is very recent and not settled beyond doubt. In it, restricted share units worth about US$4.7 million that would have vested during a 10-month notice period were recoverable. The court held that clauses ending vesting on termination are void because s. 60(1)(a), read into s. 61(1)(a), forbids altering any term or condition of employment during the statutory notice period.
• s. 60(1)(b): the employer 'shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week.'
• s. 60(1)(c): the employer 'shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee's benefits under the plan until the end of the notice period.' Health, dental, life and disability coverage continue through the statutory weeks whether or not you sign.
• s. 60(2): if you do not have a regular work week, or are paid 'on a basis other than time', your weekly figure is your average regular wages for the weeks you worked in the 12 weeks before notice was given. This matters to executives paid mainly by commission or production. For a salaried executive it usually does not apply.
• s. 60(3): if the employer fails to make the benefit contributions, the missing amount 'shall be deemed to be unpaid wages' for the Act's enforcement provisions.
• s. 60(4): that deeming does not take away 'an entitlement that he or she may have under a benefit plan.' If you become disabled during the statutory weeks, your claim under the plan survives. Egan v. Alcatel Canada Inc., 2006 CanLII 108 (ON CA) shows the common law consequence of cutting coverage early: the employer had to pay the disability benefits that would have been payable, grossed up for tax, though not on top of salary for the same months.

Section 61 governs pay in lieu, which is how almost every executive is terminated:

• s. 61(1)(a): the employer may terminate without notice if it 'pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given.' Because the lump sum is measured by what s. 60 would have produced, the no-alteration rule in s. 60(1)(a) comes with it. That is the link Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (recent, August 2026) relied on. On that reasoning, the value of units that would have vested during your statutory weeks is arguably part of what s. 61(1)(a) requires.
• s. 61(1)(b): the employer must also continue 'whatever benefit plan contributions would be required' to keep your benefits in place for the notice period you should have received.
• s. 61(1.1): if you have no regular work week or are paid on a basis other than time, the 12-week average is counted back from the day of termination rather than the day notice was given.
• s. 61(2): this limb applies only where the employer would otherwise have to give mass termination notices under section 58, and it then requires compliance with clause 58(2)(a). It does not apply to a single executive departure, so it will rarely matter to you.

Neither section makes anything depend on a release. Section 61(1)(a) requires a lump sum; it does not allow the employer to hand out termination pay over time as a reward for good behaviour. If your letter says termination pay will be paid 'upon receipt of the signed release', that is the first sentence to send back. See ESA termination notice and pay and equity during the statutory notice period.

Am I also owed ESA severance pay, and how is it calculated?

Almost certainly, if you have five or more years of service, because the employer of a senior executive nearly always passes the $2.5 million payroll test. ESA severance pay is up to 26 weeks of regular wages. It comes on top of termination pay, and it cannot be waived any more than the rest of the floor can.

Section 64 decides whether you qualify:

• s. 64(1): the employer 'shall pay severance pay' if you were employed 'for five years or more' and either (a) or (b) is met. With under five years, no ESA severance pay is owed (termination pay still is), so a short-service executive's real claim is at common law. See severance for a VP with under three years.
• s. 64(1)(a): the severance happened 'because of a permanent discontinuance of all or part of the employer's business at an establishment' and you are 'one of 50 or more employees' severed within six months. This can matter in a closure or divisional shutdown, but executives rarely need it because of (b).
• s. 64(1)(b): 'the employer has a payroll of $2.5 million or more.' This is the limb that almost always applies.
• s. 64(2)(a): the payroll test is met if total wages of all employees in the last four completed weeks before the severance, 'when multiplied by 13', reach $2.5 million.
• s. 64(2)(b): it is also met if total wages in 'the last or second-last fiscal year' reached $2.5 million. Either year counts, so a weak final year does not help the employer.
• s. 64(3): 'Prescribed employees are not entitled to severance pay.' The prescribed classes are set by regulation, not reproduced here. They cover specific situations, such as certain construction employees and employees guilty of wilful misconduct, rather than executives as a class. Even an allegation of cause does not automatically remove the floor: Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310 found cause at common law and still required the ESA payments.
• s. 64(4): a single location is treated as an establishment if there is a permanent discontinuance there, it is part of an establishment with two or more locations, and 50 or more employees are severed within six months. This matters only if you are relying on (1)(a).

Section 65 sets the amount, and every limb can move the number:

• s. 65(1): your regular wages for a regular work week, multiplied by (a) your completed years of employment plus (b) any additional completed months divided by 12.
• s. 65(2): 'All time spent by the employee in the employer's employ, whether or not continuous and whether or not active' counts. Earlier stints, leaves and disability absences are included. See continuity of service when rehired.
• s. 65(2.1): for severances on or after November 6, 2009, if you are 'in receipt of an actuarially unreduced pension benefit', service credited in that pension is excluded. An executive who is already drawing an unreduced pension from the same employer should check this. Someone who only has a deferred pension is not in receipt of a benefit.
• s. 65(3): this applies only if you resigned under clause 63(1)(e) after receiving the employer's notice, in which case the time between your resignation and the end of the employer's notice is left out. If you are not leaving early during working notice, it does not apply.
• s. 65(4): if the employer did not give the statutory notice, severance is calculated 'as if the employee continued to be employed' for the notice period that should have been given. On a pay-in-lieu termination, add the statutory weeks to your service before counting completed months.
• s. 65(5): the total cannot exceed 26 weeks of regular wages.
• s. 65(6): if you have no regular work week or are paid on a basis other than time, use your average regular wages over the 12 weeks before the severance (or before a lay-off began).
• s. 65(7): severance pay is 'in addition to any other amount to which an employee is entitled under this Act or his or her employment contract', subject to (8).
• s. 65(8): only three set-offs or deductions are allowed: 1. supplementary unemployment benefits received after the severance and before payment; 2. an amount paid for loss of employment 'under a provision of the employment contract if it is based upon length of employment, length of service or seniority'; 3. severance pay previously paid under the Act, a predecessor Act, or a contract term of that kind. A retention bonus, a transition consulting fee or a payment for signing a release is none of these. The separation agreement should say which dollars are statutory severance and pay them without conditions.

See termination pay versus severance pay.

Can my employer hold back my final pay, or penalize me, because I will not sign?

No. Wages you have earned must be paid by the s. 11(5) deadline whether or not you sign. Section 74 also bars intimidating, penalizing or threatening an employee who asks the employer to comply with the Act or tries to exercise a right under it. Asking for your ESA amounts to be paid without conditions is asking the employer to comply.

Section 11 sets the payment rules:

• s. 11(1): the employer must set a recurring pay period and pay day, and pay all wages earned in each period, 'other than accruing vacation pay', by that period's pay day.
• s. 11(2): wages must be paid by (a) cash, (b) cheque payable only to you, (c) direct deposit under (4), or (d) another prescribed method.
• s. 11(3): cash or a cheque must be given to you at the workplace or 'some other place agreeable to the employee.'
• s. 11(4): direct deposit is allowed only into an account (a) you selected and that is in your name, (b) that no one can access except you or someone you authorize, and (c) that meets any prescribed criteria.
• s. 11(5): when employment ends, the employer must pay any wages owed no later than the later of (a) seven days after the employment ends and (b) the day that would have been your next pay day.

For an executive, s. 11(5) covers salary earned to your last day and, depending on your plan's wording, any bonus already earned and payable. Subsections (1) to (4) are mechanics that rarely matter at this level. Subsection (5) is the one that matters: it sets a fixed deadline with no exception for a pending signature. The timing rules for the termination and severance lump sums are in a regulation not reproduced here, but the key point stands: neither is conditional. See an employer withholding final pay.

Section 74(1) bars an employer, or anyone acting for it, from intimidating, dismissing or 'otherwise penaliz[ing]' an employee, 'or threaten[ing] to do so', for any of these reasons:

• (a)(i) the employee 'asks the employer to comply with this Act and the regulations.' A letter from your lawyer asking for the ESA amounts to be paid without conditions is exactly this.
• (a)(ii) the employee makes inquiries about their rights under the Act.
• (a)(iii) the employee files a complaint with the Ministry. Get advice before filing, because choosing the complaint route affects a court claim under a provision not reproduced here.
• (a)(iv) the employee exercises or attempts to exercise a right under the Act.
• (a)(v) the employee 'gives information to an employment standards officer.' A confidentiality clause with no carve-out for this goes too far.
• (a)(v.1) and (v.2) the employee asks about another employee's pay rate, or discloses their own, to determine compliance with Part XII (Equal Pay for Equal Work). These apply only where that is the purpose, so a clause keeping your package confidential engages them only if you are disclosing for that reason.
• (a)(vi) the employee 'testifies or is required to testify or otherwise participates or is going to participate in a proceeding under this Act.' A cooperation clause cannot be used to keep you out of an ESA proceeding.
• (a)(vii) participation in proceedings about a by-law under the Retail Business Holidays Act. This has nothing to do with an executive departure.
• (a)(viii) the employee is or will become eligible for, intends to take, or takes a Part XIV leave. It applies if the termination or the pressure to sign is connected to a protected leave. See termination during medical leave.
• (a)(ix) inquiries about temporary help agency or recruiter licences. Not relevant here.
• (b) the employer is or may be required by a court order or garnishment to pay a third party money it owes you. This applies only if your pay is subject to garnishment, for example for support.
• s. 74(2): in any proceeding under the Act, 'the burden of proof that an employer did not contravene' s. 74 'lies upon the employer.'

One limit: s. 74 speaks of an 'employee'. It clearly covers the time you are still employed, including working notice, which is when many packages are negotiated. Whether a clawback triggered after employment ends is itself a prohibited penalty is a question for counsel. Either way, a release that tries to buy your silence toward the Ministry should be struck, because no legitimate business interest needs it.

Which parts of an executive package am I already owed, whatever I sign?

More than most offers admit. For the statutory weeks, the floor arguably now includes equity vesting as well as salary and benefits. Across a common law notice period, bonus, deferred awards, pension accrual and benefits are recoverable unless the plan wording clearly removes them. Before you decide what the conditions are worth, subtract everything the offer is simply handing back to you.

The test comes from Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26. First, would you have been entitled to the payment as part of your compensation during the reasonable notice period? Second, does the contract or plan unambiguously take that common law right away? Paquette v. TeraGo Networks Inc., 2016 ONCA 618 holds that a requirement to be actively employed on the payout date is not enough to take it away.

See RSUs vesting during the notice period, SERP and deferred compensation on termination, your bonus when terminated and benefits, car allowance and perks over the notice period.

How much does the notice period change what my package is worth?

Enormously, because every part of the package grows with the notice period. On the illustrative numbers below, the same executive is owed about $156,000 at the statutory floor and about $858,000 over an 18-month common law notice period. A six-month offer that looks generous next to salary alone may not even clear the floor once equity is counted.

The executive. A vice president, age 52, with 12 years of service at an employer whose payroll is well above $2.5 million. Base salary is $260,000 ($5,000 a week) and target bonus is $130,000. About $156,000 of restricted share units vest each year, and one $52,000 tranche is due to vest six weeks after the termination date. Benefits and pension contributions cost the employer $26,000 a year.

The contract. The termination clause includes a 'no notice for cause' limb that goes beyond the Act, so under Waksdale v. Swegon North America Inc., 2020 ONCA 391 and Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 it is void and reasonable notice applies. For illustration only, assume reasonable notice under the Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC) factors (character of the job, length of service, age, and availability of similar work) is 18 months.

The offer. Six months of base salary and benefits, bonus to the termination date, and forfeiture of unvested units. It is conditional on a release, a one-way non-disparagement clause, confidentiality and 12 months of unpaid cooperation.

ESA severance pay. This follows s. 65(1) and (4). Service at termination is 12 years. Section 65(4) adds the eight statutory weeks that were not given, which brings service to 12 years and one completed month. That gives 12 plus 1/12, or about 12.08 weeks, times $5,000, for $60,417. The s. 65(5) cap of 26 weeks is not reached. For caution, the illustration uses base salary alone as regular wages.

Three things follow. First, the offer may be below the floor. On the reasoning in Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (released August 2026 and not yet settled beyond doubt), the offer is about $13,000 below it, so the employer would be getting the release, non-disparagement and cooperation for nothing. Even leaving equity aside, the offer beats the $104,417 salary, severance and benefits floor by only $38,583. Second, the real trade is against the gap. The offer is $715,000 short of the common law figure before mitigation, and that gap is what the conditions are actually being traded against. Third, the common law number is not guaranteed. It depends on the plan wording, on how quickly you find comparable work, and on a court's view of notice. A lump sum settlement removes the risk of reductions for mitigation, which is real value to both sides.

For context: only exceptional circumstances support base notice above 24 months, according to Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14 (ON CA). Short service does not sink an executive's claim, though: Love v. Acuity Investment Management Inc., 2011 ONCA 130 awarded nine months to a senior vice president with two and a half years, because the nature of the job and the equity participation made similar work harder to find. See executive severance and notice, the duty to mitigate and valuing equity vesting during the notice period.

What does a non-disparagement clause really commit me to, and where should I push back?

It commits you not to say negative things about the company, and usually its directors, officers, employees, products and shareholders, for as long as the clause says, which is often forever. It is a lawful condition of an enhanced package. But the typical employer draft is one-sided, vague and backed by a clawback, and every one of those features can be negotiated.

• Make it mutual, in a way that actually binds someone. A company speaks only through people, so a promise that 'the company will not disparage you' binds nobody unless it names who. Name the board, the CEO, the executive leadership team and the head of human resources, and require the company to instruct them in writing.
• Define 'disparage'. Limit it to false statements, or statements a reasonable person would understand as meant to damage reputation. Exclude truthful, good faith statements made while looking for work, such as explaining that your role was eliminated.
• Carve out what the law requires or protects. This includes statements required by law, subpoena or court order; testimony in any proceeding; communications with securities regulators, law enforcement, the Ministry and an employment standards officer (s. 74(1)(a)(v)); communications with your lawyers, tax and financial advisers and immediate family; and enforcing the agreement itself.
• Put a time limit on it. Two or three years is a reasonable ask for an executive whose industry reputation is the very thing they need to protect.
• Replace the clawback with ordinary damages. A clause that forfeits the whole enhanced package for any breach, however trivial, is a pressure tactic. Courts can refuse to enforce a clause that works as a penalty rather than a genuine estimate of loss, and relief from forfeiture is sometimes available, but you do not want to be the test case. Ask for a material breach standard, written notice, a cure period, and no clawback of the statutory amounts in any event.
• Watch the link to your equity. Some plans make 'breach of any restrictive covenant' a bad leaver event. If the separation agreement calls the non-disparagement clause a restrictive covenant, one angry post could forfeit your continuing equity. Keep the covenant out of the plan's forfeiture machinery.

Know what non-disparagement does not do. It does not stop you telling a recruiter the truth about how your role ended, and it does not stop you enforcing the agreement if the company breaks it. It also does not excuse the employer's own conduct before the deal is signed. Conduct in the manner of dismissal that is untruthful, misleading or unduly insensitive can attract damages under Honda Canada Inc. v. Keays, 2008 SCC 39. See bad faith dismissal damages.

How far can the confidentiality obligations in a separation agreement reach?

They can lawfully cover two things: the company's confidential information, which you almost certainly already have to protect, and the terms of the settlement. They should not stop you using your general skill and knowledge, talking to your own advisers, or giving information to a regulator or an employment standards officer. Read the clause in three parts.

• Company information. Your employment agreement, equity grant agreements and any invention or IP assignment probably already cover this. The question is whether the separation agreement expands those duties. If 'confidential information' includes everything you learned, even public information and general industry know-how, it works as a non-compete by the back door. Ask for exclusions for information that is public (other than through your breach), that you knew before joining, or that is part of your general skill and experience.
• The settlement terms. Keeping the amount confidential is a normal condition. Carve out disclosure to your spouse or partner; to your lawyers, accountants and financial advisers, on a confidential basis; to tax authorities; where required by law; and in any proceeding to enforce the agreement. If the company is public and discloses your departure in its filings, the clause should not require you to stay silent about what the company itself has published.
• Returning and deleting information. Expect to certify that you have returned devices and documents. Negotiate the right to keep your own compensation documents, plan statements and personal contacts, and anything you need to enforce the agreement or answer a future claim against you as a former officer.

Watch for non-competition and non-solicitation covenants tucked inside the confidentiality clause. Ontario's ESA has a separate ban on non-compete agreements, with exceptions that include certain chief executive roles and the sale of a business. That provision is not reproduced here, so have counsel confirm whether the executive exception covers you. Even where a covenant is allowed, courts will not rewrite an overbroad one to make it enforceable: Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6. A covenant must also be reasonable in protecting a legitimate interest: Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 SCR 916. See non-compete agreements and non-solicitation agreements.

What does a litigation cooperation clause cost me, and how should it be paid?

It costs you time, and sometimes legal exposure, for years after your pay has stopped. An employer can fairly ask a departing executive to help with the transition and with litigation or investigations about matters they handled. It should pay for that help, limit it, schedule it around your new job, and protect you while you give it.

• Scope. Limit it to reasonable requests about matters you knew of in your role. Exclude any matter where you and the company are on opposite sides, including any dispute about this agreement.
• Time and duration. Set a cap on hours per month and an end date. Require reasonable notice of requests and scheduling that does not interfere with new employment. Your duty to look for and keep new work does not pause because your former employer wants a deposition prep session.
• Payment. Once the notice period or salary continuance ends, cooperation should be paid at an hourly or daily rate based on your former base salary, with reasonable expenses advanced or promptly reimbursed.
• Independent counsel. If your own conduct could be in issue in the litigation, investigation or regulatory inquiry, you need your own lawyer paid by the company. The company's lawyer represents the company, not you.
• Truthful evidence only. The clause should say that nothing in it requires anything but truthful evidence, and nothing in it limits your response to a subpoena, court order or regulator. The ESA reinforces this for its own proceedings: s. 74(1)(a)(vi) protects an employee who 'testifies or is required to testify or otherwise participates' in a proceeding under the Act.
• A promise, not a condition. Cooperation should be something you promise to do, not a condition of payment. If the company says you failed to cooperate, it should have to prove its loss, not simply stop paying you.
• Indemnity. Cooperation about things you did as an officer should be expressly covered by the company's indemnity and its D&O insurance.

This is where salary continuance becomes dangerous. If the package is paid monthly and the agreement lets the employer suspend payments for any alleged breach of cooperation or non-disparagement, you have given the company a lever it can pull whenever a dispute arises. A lump sum, or at least the statutory amounts up front, removes that lever. See lump sum versus salary continuance.

Should I resign from boards and officer roles, and what should the paperwork say?

You will almost always be asked to, and it is a reasonable condition. The risk is not the resignation itself. The risk is signing a document that says more than it should, losing your indemnity protection, or leaving the effective date and the corporate filings entirely in the company's hands.

• Resign the offices, not the job, unless you mean both. A resignation from employment must be clear and unequivocal: Kieran v. Ingram Micro Inc., 2004 CanLII 4852 (ON CA). A letter saying 'I resign from all positions with the company and its affiliates' invites an argument that you quit. Use a schedule listing each directorship and officer title by entity, and state that the resignations are given at the company's request following a termination without cause.
• Deal with the whole corporate group. If you sit on subsidiary boards, or a parent company pays or directs you, the release should run both ways across the group. Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 treated a parent company that directed, paid and pooled the executive as a common employer. If you release 'the company and its affiliates', get the same release from them in return, and make sure the entity that actually granted your equity is bound to honour it.
• Preserve indemnity and insurance. Your right to be indemnified for acts as a director or officer, and your coverage under directors' and officers' liability insurance (including any run-off or 'tail' coverage), should be expressly excluded from the release and stated to survive.
• Control the effective date and the filings. Directors can face personal exposure for certain corporate obligations that arise while they hold office. Require the company to file the notices of change promptly and to confirm in writing that it has done so.
• List every role. Executives forget signing authority on bank accounts, officer titles in dormant subsidiaries, and seats on pension or benefits committees. Each should be listed, resigned and removed.

Can the reference letter and the departure announcement be written into the agreement?

Yes, and for an executive they can be worth as much as a few months of pay. An employer generally has no legal obligation to give a reference. The only reliable way to get one is to attach the agreed wording to the separation agreement and bind the company to it.

• An agreed internal and external announcement, attached as a schedule, describing the departure in neutral terms.
• An agreed reference letter signed by a named senior person, attached as a schedule.
• A named contact for reference calls, and a commitment that anyone else asked will refer the caller to that person or confirm only title and dates.
• Your right to describe your departure consistently with the announcement, written as an express exception to your non-disparagement and confidentiality obligations.
• Where cause has been raised, a written withdrawal of the allegation, or at least an agreement that cause will not be asserted to anyone.

Why this matters: in Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, a 41-year-old head of global funds with eight years of service received 15 months, at the top of the range, because a cause allegation made under an ethical cloud makes it harder to get rehired. Cause failed on a single lapse. An employer that threatens to allege cause, or to withhold a reference, unless you accept its conditions risks a claim for bad faith in the manner of dismissal under Honda Canada Inc. v. Keays, 2008 SCC 39. In egregious cases it risks aggravated and punitive damages of the kind upheld in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419. See a bad job reference.

Which clause wordings have courts enforced, and which have failed?

Courts enforce clear wording and read ambiguity against the employer who drafted it. They measure termination and compensation clauses against the ESA however senior the employee is. The table sets out wordings executives often see, what the Court of Appeal and the Supreme Court of Canada did with them, and what that means for your negotiation.

Can a release, clawback or restrictive covenant still be unenforceable after I sign?

Sometimes, but negotiate as if the answer is no. Parts of a release that try to waive ESA standards are void under s. 5(1). An unreasonable restrictive covenant will not be rewritten to save it. A release can be set aside for unconscionability in narrow cases. Otherwise, a release signed by an executive who had time and advice is very likely to be enforced.

Unconscionability requires both an inequality of bargaining power and an improvident bargain: Uber Technologies Inc. v. Heller, 2020 SCC 16. An executive with a lawyer and a week to consider the offer is unlikely to meet the first requirement. A release signed in the termination meeting, under a same-day deadline, with no chance to get advice and for less than the statutory floor, looks very different. Swampillai v. Royal & Sun Alliance Insurance Company of Canada, 2018 ONSC 4023, aff'd 2019 ONCA 201 shows how the ordinary case goes: the release was enforced.

A tight deadline is a negotiating tactic, not a legal rule. Ask in writing for more time, and keep the two-year limitation period in mind while you negotiate. See does a severance offer expire and limitation periods for wrongful dismissal.

Clawback policies, often triggered by a financial restatement or misconduct, sit outside the separation agreement, and a release will not usually switch them off. Ask the company to confirm that it knows of no clawback event when you sign, and that the non-disparagement and cooperation covenants are not clawback triggers. See clawbacks of bonus and equity already paid.

Finally, releases usually cover every claim 'arising out of' your employment. That can include a long-term disability claim you have not yet made, a human rights application, and claims under your benefit plans. If a health condition affects your work, put a value on that claim before you sign. See releasing long-term disability claims and whether to sign a severance release.

What should I look for in my own documents before I negotiate?

Six things decide most executive packages: the termination clause, the incentive plan wording, the vesting schedule, change-of-control language, good leaver and bad leaver definitions, and clawback provisions. The draft release is the seventh. Read it as a new contract, because it is one.

• The termination clause. Look for any limb that pays less than the ESA, leaves out benefits or severance pay, or denies notice for a wider range of misconduct than the Act allows. Under Waksdale v. Swegon North America Inc., 2020 ONCA 391, one such limb can void the whole clause. Also check whether the clause already requires a release for the contractual severance. If it does, that condition is part of your deal for the contractual amount, but under s. 5(1) it still cannot reach the statutory amounts. See signs a termination clause is unenforceable.
• Bonus and incentive plan wording. Look for 'actively employed', 'in good standing', 'employed on the payment date', 'no entitlement on termination with or without cause' and 'shall not increase damages'. Each is measured against the test in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26: does it unambiguously remove your right to the payment over the notice period? Most common wordings have failed that test. If your bonus varies, see averaging a variable bonus over the notice period.
• The vesting schedule. List every grant, its tranche dates and the value on each date. Tranches in the statutory weeks are the ones Wigdor v. Facebook Canada Ltd., 2026 ONCA 572 (recent, August 2026) protects; tranches in the common law period depend on plan wording. A tranche due a few weeks after termination is often the biggest single number in the negotiation. See terminated weeks before a vesting date.
• Change-of-control language. A single trigger means vesting on the transaction itself. A double trigger means vesting only if you are terminated without cause, or resign for good reason, within a set window after the transaction. If a deal is rumoured or has closed, check whether your termination falls inside the window, whether 'good reason' covers a changed title or reporting line, and whether the acceleration is conditional on a release. If the plan already sets the release it requires, extra non-disparagement or cooperation terms may go beyond what the plan allows the employer to demand.
• Good leaver and bad leaver definitions. Check whether termination without cause is a good leaver event, whether good leaver treatment requires a release or compliance with covenants, and whether breaching any covenant turns you into a bad leaver. See good leaver and bad leaver terms.
• Clawback provisions. What triggers them (restatement, misconduct, breach of covenant), what they reach (cash bonus, vested equity, gains on exercise), and how long they last.
• Pension, SERP and deferred compensation documents. Check whether the wording stops accrual at the termination date. Weigh that against Taggart v. Canada Life Assurance Company, 2006 CanLII 53345 (ON CA), and note any payment elections and deadlines you face.
• The draft release and separation agreement. Check who is released (the company, affiliates, directors, officers, insurers); what is released (every claim, or employment claims only); what is carved out (vested equity, deferred compensation, accrued pension, indemnity and D&O coverage, expenses, disability claims, and enforcement of the agreement); whether the release is mutual; and which dollars are statutory and paid without conditions.

What should I do before I respond to the offer?

Protect the floor, stop the clock and build the numbers before you negotiate a single word. The steps below are the order that works for most executives.

1. 1.Do not sign, initial or acknowledge anything in the termination meeting. That includes a confirmation that your equity ends on the termination date and a board resignation letter in the company's form.
2. 2.Confirm in writing that you are reviewing the offer with counsel, and ask for any deadline to be extended.
3. 3.Check that your final wages were paid within the s. 11(5) deadline, and that your statutory termination pay, severance pay and benefit continuation are not being held back pending a signature.
4. 4.Collect your own compensation records (agreements, plan statements, pay records) before your access is cut off. Do not take company confidential information.
5. 5.Build a three-column calculation, part by part: the ESA floor, the offer, and the common law value over a realistic notice period.
6. 6.Mark up the non-money terms: mutual obligations, carve-outs, time limits, cooperation pay and indemnity, the board resignation schedule, the reference and the announcement.
7. 7.Do not file an ESA complaint as a first step without advice, because choosing that route affects a court claim.
8. 8.Keep looking for comparable work and keep a record of your search. It protects the common law number whether you settle or sue.

What documents should I gather, and what questions should I ask?

Gather every document that sets or changes your compensation. Then ask questions that force the employer to separate what it owes you from what it is offering. Do both before you respond to the substance of the offer. Documents to gather:

• Your offer letter and employment agreement, plus every amendment, promotion letter and online acknowledgement you clicked.
• The termination letter, the draft separation agreement and the draft release.
• Bonus and incentive plan texts for the last three years, your award letters, target percentages and payout history.
• Every equity grant agreement, the plan text, the vesting schedule and a current statement from the plan administrator.
• Any change-of-control, retention or transaction bonus letters.
• Any shareholders' agreement, if you bought or hold shares.
• The pension plan booklet, SERP or deferred compensation plan text, and your latest statements.
• The benefits booklet, including the LTD policy and any conversion rights.
• The clawback policy, code of conduct and any restrictive covenant, confidentiality or IP assignment agreement.
• Board and officer appointment records, any indemnity agreement, and the D&O insurance summary.
• Pay stubs, recent T4s and any outstanding expense claims.
• Any written communication about your performance or the reasons for termination.

Questions to put to the employer, in writing:

• Which dollars in this offer are ESA termination pay, severance pay and benefit continuation, and will they be paid whether or not I sign?
• What happens to each unvested tranche, on what date do you say vesting stops, and has that position been checked against Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, the Court of Appeal's August 2026 decision?
• Is this year's bonus, and bonus for the notice period, included, and how was it calculated?
• Which named people at the company will the non-disparagement clause bind?
• After the notice period, how will cooperation be paid, capped and scheduled, and will the company pay for my own counsel if my conduct is in issue?
• Do my indemnity and D&O coverage survive, including any run-off coverage?
• What exactly will the announcement and the reference say, and who will take reference calls?
• Is any allegation of cause being made or kept in reserve?
• Does the release cover disability claims, and will you carve them out?
• Can the payment be a lump sum rather than salary continuance, can any clawback exclude the statutory amounts, and how will the payment be characterized for tax? See is severance taxable.

About the Author

Priya Sharma

Legal Writer, Mirza Law

Priya Sharma is a legal writer at Mirza Law in Toronto. She writes about wrongful dismissal, workplace rights, and what Ontario employees can do when they are treated unfairly.

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