“To Enforce or Not to Enforce?”: Recent Court of Appeal Decisions About Termination Clauses

Recently, there have been new contractual termination clause cases at the Ontario Court of Appeal adding to the ever-expanding body of law about enforceability. This article provides an overview of these recent developments.

Bertsch v. DataStealth Inc. 2025 ONCA 379 (“Bertsch”)

This was an appeal from the Ontario Superior Court of Justice. The appellant employee was terminated without cause after 8.5 months of service and received four weeks’ pay in lieu of notice.

However, the termination provision stated that, “If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the Ontario Employment Standards Act, 2000 (“ESA").”[1]

The appellant argued that he was entitled to common-law pay in lieu of notice as the termination provision in his employment contract was void as it violated the minimum standards provided by the ESA. Specifically, he submitted that the motion judge had erred because an ordinary person would understand the provision to mean that they could be terminated from their employment without notice for negligence (as opposed to “willful misconduct, disobedience or willful neglect of duty”).

However, the Court of Appeal found that the agreement did not use legal terms that might be confusing to a lay person. Therefore, there was no ambiguity in the provision that would permit the termination provision to be unenforceable.

As a result, the justices upheld the decision. Although courts generally prefer an interpretation of termination provisions that favour employees, the Court here found there was no ambiguity in this clause. For a provision to rise to the level of ambiguity, it must contain, “more than the mere existence of competing interpretations.”[2]  Therefore, the termination provision was enforceable, and the appellant was precluded from receiving greater notice for a wrongful dismissal action.

Differentiating Bertsch with Dufault v. Ignace (Township), 2024 ONCA 915 (“Dufault”)

In Dufault, which preceded Bertsch, the justices considered a different termination clause to determine whether it complied with the minimum standards of the ESA.

Earlier, the motion judge decided that sections of the termination clause were unenforceable because they did not comply with the ESA. Specifically, the “for cause” provision allowed the employer to terminate for cause without notice or pay in lieu. It defined “cause” quite broadly:

However, provisions which seek to deny an employee notice or pay in lieu must rise to the high level of employee willful misconduct, disobedience or willful neglect of duty falling within s.55 of the ESA. This includes employees, “deliberately knowing that they are doing something wrong.” Termination clauses must therefore be interpreted in a way that encourages employers to draft agreements that comply with the ESA.

In this case, the “for cause” provision stated that, “the failure of the employee to perform services as specified”[4] would be sufficient to terminate “without notice or pay in lieu of notice for cause”. However, this is a lower standard of misconduct than that specified in the ESA. So, the clause is not sufficiently limited in this case.

The Court of Appeal agreed with the motion judge.

However, the motion judge had also found that the inclusion of “at its sole discretion” and “at any time” in the termination “without cause provision” of the contractual termination clause (“The Township may at its sole discretion and without any cause, terminate this Agreement and the Employee’s employment thereunder at any time…”) violated the ESA since “an employee cannot be terminated while the employee is on leave or in reprisal for exercising a right”.

On appeal, the justices declined to rule about the inclusion of the words “at its sole discretion” and “at any time” in the without cause provision given that they had already ruled that the wording of the “for cause” section violated the ESA.   

Recently, the Supreme Court of Canada dismissed the employer’s application for leave to appeal without reasons (2025 CanLII 51603).

Meanwhile, in Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 (“Baker”) the Superior Court found that, per Dufault, an employer cannot, pursuant to a termination clause, fire an employee “at any time” without breaching the ESA.  

Eventually, the Court of Appeal will weigh on whether including this phrase violates the ESA.

De Castro v. Arista Homes Ltd., 2025 ONCA 260 (“De Castro”)

This case involved an employee who had been dismissed without cause. In the termination clause, “for cause” termination was again defined broadly. The defendant (appellant) conceded that if the termination “for cause” provision did not comply with the ESA, then the “without cause” provision would also then be struck. However, the defendant argued that the contract did, in fact, comply with the ESA.  

The motion judge found that the contract defined “for cause” more broadly than the narrow grounds that the ESA provides for denying notice or pay in lieu. On appeal, the justices held that the motion judge did not make an over-riding error. The “for cause” provision allowed termination without notice in situations that would normally not be allowed under the ESA.

The termination clause stated that “for cause” termination was defined as, “includ[ing]…involvement in any act or omission which would in law permit” termination without notice.

This language was construed by the justices as being overly broad. They highlighted that employment contracts should always be interpreted differently than commercial contracts to protect the interest of employees. Thus, any contractual ambiguity will be interpreted to favour the employee.

Takeaways for Employer Counsel

It is advisable for employer counsel to ensure that termination clauses in contracts are as unambiguous as possible. Employers should pay particular attention to ensuring that “for cause” provisions are narrowly construed such that they fit the definition of willful misconduct [etc.] in the ESA. If “for cause” provisions are sufficiently broad, they run the risk of also invalidating the “without cause” part of the clause. Further, counsel might consider leaving out a “for cause” provision altogether.

Takeaways for Employee Counsel

Counsel should check employment contracts to see if there is any ambiguity in the termination provision. If not, they should determine whether both the “for cause” and “without cause” language is narrow enough so as not to violate minimum entitlements outlined in the ESA (including any potential violations). At this time, termination clauses providing for termination “at any time” will violate the ESA. The Court of Appeal will eventually consider that phrase, despite declining to do so in Dufault.

About the Author

Samara Rotstein is an employment lawyer. She received her JD from Osgoode Hall Law School. She has experience working in civil litigation at the Crown Law Office Civil, and working as an employment lawyer at a plaintiff-side employment boutique. She can be reached at: samara.rotstein@gmail.com 

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