Legal Alarms: Are Your Employment Contracts Outdated?

Legal Alarms: Are Your Employment Contracts Outdated?

Recent changes to the law should have employers reviewing their employment contracts.

Since 2020, the landscape of employment contracts and termination provisions has been shifting quickly, rendering many employment contracts unenforceable. Each year, Ontario courts have released new decisions which slash the likelihood that an employment contract will be enforceable at the time of dismissal. An unenforceable employment contract opens the door to greater notice entitlements and expensive severance packages. Following these updates, employers should be sure to have their contract review to ensure that they are up to date.

How can an illegal ‘for cause’ termination provision affect an employee’s entitlement to notice?

The landmark case of Waksdale v Swegon North America Inc. (2020 ONCA 391) was denied leave to appeal to the Supreme Court of Canada in 2021. This case found that an entire termination provision will be made unenforceable by any clause which violates the Employment Standards Act (“ESA”), even if that specific clause is not relied on at the time of dismissal. In Waksdale, an illegal ‘for cause’ termination provision entitled the employee to reasonable notice of dismissal, despite the fact that he was dismissed without cause. The court refused to sever the illegal provision, and instead found that the termination provisions must be read as a whole.

This has opened the flood gates for new decisions which have confirmed that any clause that could potentially withhold the minimum ESA entitlements on dismissal may invalidate the entire termination clause (even if illegalities are found outside of the termination provisions). As a result, most older employment contracts will not stand up to scrutiny if tested in court.

Waksdale and the following decisions are employee-friendly cases that should have employers questioning their own contracts. Contracts for new hires should be reviewed to ensure enforceability, and employers may wish to consider introducing new contracts for existing employees as well.

How can Whitten & Lublin assist employers with their specific employment concerns?

If employers have questions about potential entitlements on dismissal and employment contracts, they should reach out to an experienced employment lawyer for advice. We encourage employers to speak with a lawyer to understand their rights and obligations, or any other employment concerns. We at Whitten & Lublin are happy to provide insight and advice into your specific circumstances. If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or by phone at (416) 640-2667 today.

Author – Rachel Patten