June 5, 2025
We have written about numerous examples of how courts favour employees in interpreting termination clauses. Even a marginal divergence from the requirements of the Employment Standards Act will result in a ruling that the employee is entitled to common law notice.
THE ISSUE
Since the whole point of most termination clauses is to limit compensation to departing employees, this continues to result in adverse results for employers.
THE CASE
A recent example at the Ontario Court of Appeal is De Castro v. Arista Homes Limited.
This case upholds a decision of a Superior Court judge who applied the leading case of Waksdale v. Swegon North America Inc.The Court of Appeal refers to Waksdale as the “governing authority”.
The termination clause in this case defined “cause” more broadly than the ESA. The Court of Appeal agreed with the initial ruling that the plain grammatical meaning of the words invalidated the clause. As they put it, this was a situation of “the application of established principles governing employment contracts.”
The Court of Appeal goes on to comment that courts generally interpret employment contracts “differently than other commercial agreements to protect the interests of employees” because “Employees have less bargaining power than employers. Furthermore, employees are far less likely than employers to be familiar with the standards dictated by the ESA.”
They note that the ESA is “ remedial legislation, intended to protect the interests of employees” and that courts strive to encourage employers to comply with the minimum requirements of the Act. The objective is to extend the Act’s “protections to as many employees as possible”. Further they say that “The contract is to be read as a whole, with any ambiguity construed in favour of the employee.”
TAKEAWAYS
- The time has come for ALL employers to review termination clauses in their employment contracts.
- Complying with the ESA is technical, best attempted by lawyers.
- If your agreements predate 2020, the termination clauses are even more likely to be problematic.
- Revising existing contracts requires fresh consideration to the employees affected.
WHAT WEILERS LLP CAN DO TO HELP YOU
The employment law group at Weilers LLP is here to help employers comply with the ESA. Whether you are drafting new contracts or termination under old contracts, we can help you.
We also are here to advise terminated employees about their rights.
Give us a call, we may be the right lawyers for you.