Is an employment contract ever really an employment contract in Ontario?

Dan Wilband

Thousands of employment contracts could become unenforceable next week. On January 16, the Court of Appeal for Ontario will hear two appeals that ask whether standard language that has appeared in termination clauses for decades is unenforceable.

Courts are now split on whether phrases permitting an employer to terminate someone’s employment “at any time” violate employment standards legislation, even when the contract clearly states employees will receive their full statutory entitlements. In some recent cases (Dufault, Baker, Chan), judges have struck down these clauses, while others (Li v Wayfair, Jones v Strides) have rejected this hyper-technical approach and ruled the language is perfectly fine when the contract is read as a whole.

The practical stakes are significant. When a termination clause fails, what you thought was a modest severance obligation can become many months of common law notice pay. We often see this transform manageable separations into six or seven-figure exposures.This matters beyond Ontario. Employment law precedents from Ontario’s appellate court influence interpretation across Canada. Employers everywhere in Canada are watching these appeals.If your organization has not reviewed its employment agreements in the past couple of years, now is the time. The Court of Appeal will provide some clarity, but it is better to know where you stand now rather than discover vulnerabilities later.

If you have concerns about your organization’s employment contracts, consider reaching out to an employment lawyer.