Is Your Termination Clause Enforceable in Ontario?

If your employer is offering you only the statutory minimum "because of the contract," the most valuable question in employment law is whether that termination clause is actually enforceable. Very often it is not. Ontario courts strike these clauses down constantly, and when a clause fails, the small number in your offer is replaced by your full common law entitlement.

Can a contract limit your severance?

Yes, in principle. An employer can use a termination clause to limit you to the ESA minimums instead of the much larger common law amount. But the law sets a high bar for doing so. The Supreme Court held in Machtinger v. HOJ Industries ([1992] 1 SCR 986) that if a termination clause tries to give you less than the ESA requires, it is void, and a void clause does not just fall back to the ESA minimum: it revives your full common law entitlement to reasonable notice. In other words, a badly drafted attempt to limit your severance can backfire completely on the employer.

The Waksdale rule: one bad sentence voids the whole clause

This is the most important case for employees to know. In Waksdale v. Swegon North America Inc. (2020 ONCA 391), the Court of Appeal held that the termination provisions of a contract are read as a whole. If any part of them breaches the ESA, the entire termination clause is unenforceable, even a different, technically compliant part that the employer is trying to rely on, and even if the offending words describe a situation that never happened to you. In Waksdale itself, the employer conceded its "for cause" provision was illegal; that alone voided the separate "without cause" clause it was actually using. One defective sentence handed the employee his full common law notice.

Does it matter that you negotiated the contract?

No. Employers often argue that a clause should stand because it was negotiated between sophisticated parties. Ontario courts have rejected that. In Rahman v. Cannon Design Architecture Inc. (2022 ONCA 451), a motion judge had upheld a senior executive's termination clause partly because she was a sophisticated party with independent legal advice. The Court of Appeal reversed, holding that the bargaining power or sophistication of the parties cannot save a clause that breaches the ESA. The ESA floor applies to everyone, from an entry-level worker to a C-suite executive.

Newer traps: "sole discretion" and "at any time"

Courts keep finding new ways these clauses fail. In Dufault v. The Corporation of the Township of Ignace (2024 ONSC 1029), the court struck down a termination clause because it purported to let the employer terminate "at any time" and in its "sole discretion." That language conflicts with the ESA, which prohibits firing an employee for exercising a protected right or while on a protected leave, so the employer does not in fact have an unfettered right to terminate at any time. The clause was void, and the employee recovered pay for the balance of her fixed term, assessed at over 23 months. If your contract contains this kind of sweeping language, it is a strong signal the clause may not hold up.

What happens if your termination clause is void?

You go from the statutory floor to the full common law ceiling. Instead of a few weeks of ESA notice, you are entitled to common law reasonable notice, based on your age, length of service, role, and the job market, up to around 24 months. For a long-service or older employee, the difference between the two can be tens or hundreds of thousands of dollars. This is exactly why a proper review of the clause is the single highest-value step after a dismissal.

What should you do?

1. 1.Do not accept a "minimum" offer at face value. Assume the clause might be unenforceable until it is reviewed.
2. 2.Send your full employment contract and any offer letter, including every termination and "for cause" provision, for review.
3. 3.Do not sign a release in exchange for the ESA minimum before you know whether the clause holds up.
4. 4.Get advice quickly. A free review can tell you whether your clause survives Waksdale and what your real entitlement is.

To understand the number that comes back if the clause fails, see severance pay in Ontario and what a wrongful dismissal claim looks like. If your employer alleged cause, the with cause vs. without cause guide explains why that rarely holds up either.

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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