Ontario Courts Do Enforce Termination Clauses

In Bertsch v. Datastealth Inc., 2024 ONSC 5593, the Ontario Superior Court confirmed that a well-drafted termination clause that clearly limits an employee’s rights to the minimum entitlements under the Employment Standards Act, 2000 (ESA) can be enforced if it does not conflict with the ESA.

Background

The employee worked for Datastealth Inc. for about eight and a half months before he was let go on June 7, 2024. His employment contract limited his termination pay to ESA minimums only. He was given four weeks’ pay in lieu of notice, which was more than the ESA minimum of one week.

The contract said:

Termination of Employment by the Company:

If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the ESA and its Regulations, including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.

You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.

It also said in section 11(a):

If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owing under the ESA, you shall instead receive your minimum entitlements under the ESA.

The employee argued that these terms were unclear and breached the ESA because they did not clearly state that an employee dismissed for “just cause” must still get ESA notice unless they committed wilful misconduct. He claimed twelve months’ reasonable notice at common law.

Decision

The Court rejected the employee’s claim.

The Court confirmed that termination clauses must match the ESA’s strict rules, but Datastealth’s contract did not break any ESA rules because:

• It clearly limited pay on termination to the ESA minimums only.
• It specifically said that if any term ever fell below the ESA minimums, the ESA minimums would prevail.
• It did not contain any wording that denied required ESA payment in cases where an employee was fired for something less than wilful misconduct.

The Court found no ambiguity in the language and ruled that the clause validly replaced any claim to common law notice.  Unlike other cases where employers failed because their “with cause” provisions were too broad, Datastealth’s wording did not conflict with the ESA’s “wilful misconduct” standard.

Because there were no facts in dispute, the Court decided the legal question under Rule 21 and dismissed the employee’s claim for any notice beyond what he had already been paid.

Takeaway for Employers

This case shows that Ontario courts will enforce ESA-only termination clauses if they are clear, accurate, and do not overreach.  

Employers in Ontario should:

• Use straightforward language that clearly limits notice or pay to ESA minimums only.
• Include a “failsafe” confirming that if anything falls below the ESA, the ESA minimums apply instead.
• Avoid any suggestion that an employee can be denied ESA minimums for anything less than wilful misconduct.

When drafted properly, ESA-only termination clauses can protect employers from unexpected common law notice payments, but the wording must be precise.

For questions about this topic or any other workplace law matters, please reach out to Scott Marcinkow or a member of our Workplace Law team. You can also explore more insights by browsing our latest blog posts here.