Warning for Employers Regarding the Validity of Termination Provisions in Employment Agreements

  • February 02, 2022
  • Jessica Byles

In 2020, the landmark case of Waksdale v Swegon North America Inc. caused a ripple effect in the validity of termination provisions throughout Ontario. The Waksdale decision requires that most employers revise the termination provisions in their existing employment contracts or run the risk that they may be required to provide a terminated employee significantly more money than the minimums required in the Employment Standards Act (“ESA”).

In the Waksdale matter, Mr. Waksdale was terminated on a without cause basis. Within his employment contract, there was termination provisions that considered both termination with cause and without cause. The termination without cause provision provided that the employer would only compensate the employee with the statutory minimum entitlements required by the ESA. Mr. Waksdale was only employed for a period of eight (8) months, therefore the statutory minimum entitlement was one (1) week of pay-in-lieu of notice. Mr. Waksdale brought an action seeking six (6) months common law notice.

Mr. Waksdale conceded that the without cause termination provision in his employment agreement complied with the ESA, however, the clause should not be found enforceable as the termination for cause provision did not comply with the ESA. The Employer brought a summary judgment motion, and the motion judge found that the termination of employment with notice provision is a stand-alone, unambiguous and enforceable clause. Mr. Waksdale appealed this decision.