The termination of employment marks a pivotal moment in the employer-employee relationship, often giving rise to legal and financial implications. In Ontario, the principles of common law play an essential role in determining an employee’s entitlements upon termination, particularly where the employment agreement does not include a valid and enforceable termination clause. While the statutory framework under the Employment Standards Act sets out minimum obligations, common law principles frequently go beyond these thresholds, providing employees with remedies that reflect fairness and the specific circumstances of their employment.
Recent case law highlights the courts’ rigorous approach in ensuring that termination clauses comply with the ESA and adhere to principles of equity. By exploring pivotal rulings, we gain insight into the judicial reasoning that shapes the entitlements of terminated employees and reinforces the importance of both statutory and common law protections.
The Foundation of Common Law Notice
Under common law, employees are entitled to reasonable notice or pay in lieu of notice upon termination without cause. The seminal case of Bardal v. The Globe & Mail Ltd. (1960) established the factors that courts consider when determining reasonable notice. These factors, often referred to as the “Bardal Factors,” include:
- The employee’s age;
- Length of service;
- Character of employment;
- Availability of similar employment considering the employee’s experience, training, and qualifications.
The court’s reasoning in Bardal underscores that there is no universal formula for calculating reasonable notice. Instead, each case requires a contextual analysis to ensure the notice period aligns with the employee’s specific circumstances.
Enforceability of Termination Clauses
Employers often include termination clauses in employment agreements to limit an employee’s entitlements to the statutory minimums under the ESA. However, courts have consistently scrutinized these clauses for non-compliance with the ESA. If a termination clause is found to have contravened the ESA, it is deemed unenforceable, and the employee is entitled to common law notice.
In Machtinger v. Hoj Industries Ltd. (1992), the Supreme Court of Canada affirmed that termination clauses must, at a minimum, meet the standards established by the ESA. A clause offering less than the statutory minimums is automatically invalid. This principle was reinforced in subsequent case law, demonstrating the courts’ unwillingness to uphold provisions that fail to provide employees with the protections guaranteed by law.
Recent Developments in Common Law Termination Cases in Ontario
The landscape of employment law in Ontario continues to evolve, with recent judicial decisions shedding light on the enforceability of termination clauses and the common law entitlements of employees upon termination.
In the 2025 case of Baker v. Van Dolder’s Homes Team Inc., the Ontario Superior Court invalidated a termination clause that allowed the employer to terminate an employee “at any time” without cause, providing only the minimum entitlements under the ESA. The court found that this language was inconsistent with the ESA, which prohibits termination in certain circumstances, such as in reprisal for exercising statutory rights.
Justice Sproat ruled that the termination clause was unenforceable, exposing the employer to common law notice obligations. Accordingly, the Plaintiff, who had been terminated on a without cause basis, was awarded damages equivalent to 12 months of salary and benefits, reflecting her age, length of service, and the character of her employment.
Similarly, the 2024 case of Dufault v. The Corporation of the Township of Ignace involved a fixed-term employment contract that was terminated prematurely. The termination clause in the contract allowed the employer to terminate the employee “at any time” and “at its sole discretion,” language which the court found to be inconsistent with the ESA. Justice Pierce emphasized that employment contracts must strictly comply with the ESA, particularly when they attempt to limit an employee’s entitlements.
The court awarded the Plaintiff damages equivalent to the wages and benefits she would have received for the unexpired term of the contract, amounting to 101 weeks of salary.
In Perretta v. Rand A Technology Corporation 2021, the employer’s actions upon termination were found to constitute a repudiation of the employment contract. The employer had refused to pay the additional two weeks’ notice stipulated in the contract unless the employee executed a Full and final Release, a condition not included in the agreement.
Justice Sanfilippo ruled that the employer’s conduct demonstrated an intention not to be bound by the contract, rendering the termination provisions unenforceable. The Plaintiff was, accordingly, awarded damages for wrongful dismissal at common law, which exceeded the contractual entitlements.
The Significance of Common Law Entitlements for Employees
Employees in Ontario possess significant protections under common law when they are terminated, and these entitlements often exceed the statutory minimums prescribed by the ESA. As highlighted in the foregoing cases, the absence of an enforceable termination clause in an employment contract opens the door to claims for reasonable notice at common law.
For instance, in Baker, the court’s invalidation of the termination clause emphasized that even minor inconsistencies with the ESA could result in substantial awards, as evidenced by the 12 months’ notice granted. Similarly, Dufault demonstrated how failure to comply with statutory protections in fixed-term contracts can lead to significant financial liabilities- 101 weeks of salary in that instance. The judgment in Perretta further underscored the importance of employer compliance with both contractual and statutory obligations, as breaches may lead to common law entitlements that exceed what might have been initially agreed upon.
These cases collectively illustrate that employees are entitled to a comprehensive review of their termination circumstances. Factors such as their age, length of service, and character of their employment may play a pivotal role in determining reasonable notice. The judgments reflect the courts’ commitment to protecting employees from unfair treatment and ensuring that their entitlements align with the principles of statutory compliance and fairness.
For employees, these legal precedents reinforce the importance of seeking legal advice when facing termination. Understanding their rights under common law could lead to significant compensation that is far more generous than statutory minimums. The evolving jurisprudence also serves as a reminder to employers that careful and compliant drafting of termination clauses is not merely a best practice but a legal necessity. This balance ensures that employees are treated fairly while encouraging employers to act in good faith during the termination process.