Termination Clauses in Ontario: Why Many Don’t Work
Termination clauses are intended to limit liability.
Many fail to do so.
The Problem
Courts have taken a strict approach.
If a clause has the potential to violate employment standards legislation, it may be unenforceable in its entirety.
The Effect
When a clause fails, the employee is entitled to common law notice.
This is often significantly greater than statutory minimums.
Interaction with Misclassification
If a contractor is found to be an employee, and the agreement does not contain a valid termination clause, the exposure increases.
The structure collapses in two places at once.
The Practical Takeaway
Termination clauses must be precise.
If they are not, they do not limit liability.