Ontario Court of Appeal enforces employment standards minimum termination clause

At a glance

• The Ontario Court of Appeal upheld a termination clause that limited entitlements to the minimum standards under the Ontario’s Employment Standards Act 2000 (ESA), confirming it was clear, unambiguous, and legally compliant.
• The court dismissed the employee’s claim that the clause was ambiguous or misleading, emphasising that enforceability depends on reasonable interpretation, not potential misunderstanding by a layperson.
• The decision aligns with a broader judicial shift toward a common-sense, practical approach to interpreting employment contracts.

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In Bertsch v Datastealth Inc., 2025 ONCA 379 (Bertsch), the Ontario Court of Appeal (ONCA) upheld a motion judge’s decision to strike a claim that challenged the enforceability of a termination clause that limited the employee’s termination entitlements to the minimum standards under ESA. The ONCA confirmed that the clause was unambiguous, compliant with the ESA, and enforceable.

The decision provides much-needed guidance to employers regarding the enforceability of termination clauses in Ontario and provides an example of a termination clause that has been approved by the ONCA.

Background

In Bertsch, the employee was a former Vice President who was terminated after eight and a half months of service with the employer. The employer provided four weeks’ pay in lieu of notice to the employee on termination of employment. The termination clause in the employment agreement limited the employee’s termination entitlements to the minimum standards under the ESA and excluded any entitlement to reasonable notice at common law.

The termination clause stated as follows:

5. Termination of Employment by the Company: 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 [ESA] and its Regulations, as may be amended from time to time,…including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.

You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.

Following termination, the employee brought a claim for wrongful dismissal against the employer. In his claim, the employee alleged that: (1) the termination clause was unenforceable; and (2) the employee was entitled to reasonable notice at common law. Among other things, the employee argued that the termination clause permitted the employer to terminate the employee’s employment for cause short of 'wilful misconduct, disobedience or wilful neglect of duty', without payment, contrary to the ESA.

The employer brought a motion to strike the employee’s claim, arguing that there was no viable cause of action because the termination clause was unambiguous, compliant with the ESA, and enforceable.

Ontario Superior Court of Justice (SCJ) decision

The SCJ sided with the employer, found the termination clause was enforceable, and struck the employee’s claim without leave to amend.

The SCJ found that: (1) the termination clause did not permit the employer to terminate the employee’s employment for cause short of 'wilful misconduct, disobedience or wilful neglect of duty', without payment; (2) the termination clause effectively excluded any claim for common law reasonable notice; (3) there was 'no reasonable interpretation' of the termination clause that would be contrary to the minimum requirements of the ESA; and (4) the termination clause was clear and unambiguous.

ONCA decision

The employee appealed the SCJ’s decision and argued that the SCJ erred when it refused to find that the termination clause was ambiguous. The employee asserted that, while a person trained in the law might find the clause unambiguous, an ordinary person could mistakenly believe it permits the termination of their employment without notice for conduct such as negligence.

The ONCA upheld the SCJ’s ruling, confirming that the termination clause was enforceable. 

In upholding the termination clause and dismissing the employee’s claim, the ONCA rejected the employee’s argument that an ordinary person untrained in the law might find the clause to be ambiguous. As the ONCA stated, the issue was how the termination clause could be reasonably interpreted and not whether an ordinary person might adopt an incorrect interpretation of the termination clause.

Cross Canada common-sense approach

The reasoning in Bertsch is in line with the recent decision from the British Columbia Court of Appeal (BCCA) in Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222 (Egan).

In Egan the BCCA found a termination clause enforceable that limited termination entitlements by simply referencing the minimum statutory termination entitlements under the Canada Labour Code (Code).

Although not explicitly stated in the termination clause, the BCCA found that it was clear that the intent of the termination clause was to limit the employee’s termination entitlements to those in the Code.

BCCA stated that there is more than one way to rebut the presumption of reasonable notice at common law, and courts are required to assess the parties’ intentions by applying a 'practical, common-sense approach to contractual interpretation'.

The BCCA further found that the termination clause’s 'silence' on all forms of the employee’s compensation (eg, benefits, bonus) cannot be interpreted as permitting the employer to contract out of the employee’s statutory obligations.

The BCCA upheld the Supreme Court of British Columbia’s ruling dismissing the employee’s action.

Takeaways

Bertsch and Egan confirm that it is still possible to draft an enforceable termination clause that limits an employee’s entitlements on termination to the minimum standards under applicable employment standards legislation. Bertsch and Egan may also signal that Canadian courts are shifting toward a more practical and common-sense approach to the interpretation of termination clauses then what has been seen in the past.

Employers should continue to regularly review their employment agreements to confirm that their termination clauses are up to date and compliant with current legal guidance.