Termination Clauses That Self-Destruct — Why 90% of Them Are Unenforceable

Your Employer Thinks They Capped Your Severance. They Probably Didn't.

I talk to business owners every week who have employment contracts their lawyer drafted in 2018 and never reviewed. Those contracts are loaded weapons pointed at their balance sheets.

Here's what happened: in 2020, the Ontario Court of Appeal dropped a bomb called Waksdale v. Swegon North America Inc., 2020 ONCA 391, and the ground shifted under every employment contract in the province. The rule is devastatingly simple — if any part of your termination scheme violates the ESA, the entire scheme is void. Not just the bad part. All of it.

The real scandal isn't Waksdale itself. It's the fact that five years later, the majority of employment contracts in Ontario still haven't been updated. For years, lawyers drafted for-cause clauses that said "no notice, no pay" — knowing that the ESA provides minimum entitlements even in most cause situations. They knew it was wrong. They did it anyway because nobody challenged it. Until someone did.

Here's the thing about termination clauses: they either work perfectly or they don't work at all. There's no partial credit. A clause that's 95% compliant with the ESA is 100% unenforceable. That's the rule now. And if you're an employee being shown the door with an offer based on a defective clause, you need to know that.

In November 2025, the Ontario Superior Court struck down yet another termination clause — the fourteenth reported invalidation of the year. The employer in Matheson v. Velocity Vehicle Group Ltd. thought they'd limited a mid-level employee's severance to ESA minimums. The court awarded 20 months instead. That's the difference between roughly $25,000 and $250,000 for a six-figure employee.

The Case That Changed Everything

The facts in Waksdale were unremarkable. Benjamin Waksdale was terminated without cause after less than two years of employment. His contract contained two termination provisions: one for termination without cause and one for termination with cause. The without-cause provision was arguably ESA-compliant. The with-cause provision was not — it attempted to deny the employee statutory entitlements upon a for-cause termination, which violates the ESA.

Swegon's position was straightforward: "We terminated him without cause. The without-cause clause is fine. Who cares if the for-cause clause is defective — we never relied on it."

The Court of Appeal cared. Justice Hoy, writing for a unanimous panel, held that the termination provisions must be read as a whole. If any part of the termination scheme violates the ESA, the entire scheme is void — including the parts that, standing alone, would have been compliant.

The Supreme Court of Canada declined to hear Swegon's appeal. Waksdale is the law.

The Reasoning: Why One Bad Clause Kills the Whole Contract

The Court's reasoning rested on two pillars:

First, the ESA is remedial legislation. Its purpose is to protect employees — the more vulnerable party in the employment relationship. Courts must interpret the ESA broadly and generously in favour of employees and strictly against employers who seek to limit statutory protections.

Second, termination provisions are a single scheme. The without-cause clause and the for-cause clause aren't independent provisions. They work together to define the employer's obligations upon termination. You can't sever the bad clause and save the good one because they're designed to operate as a package.

Justice Hoy wrote: "An employment agreement must be interpreted as a whole, and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA."

Why This Matters: The Common Law Default

When a termination clause is void, your entitlement reverts to the common law. And the common law is far more generous than the ESA.

Under the ESA, an employee with two years of service gets two weeks' notice. Under the common law, that same employee might be entitled to three to six months of reasonable notice — or more, depending on the Bardal factors: age, position, length of service, and the availability of comparable employment.

For a senior employee earning $150,000 per year, the difference between ESA minimum notice and common law reasonable notice is potentially hundreds of thousands of dollars. This is the cost of a defective termination clause.

The Drafting Traps That Catch Employers

Since Waksdale, Ontario courts have catalogued the specific defects that invalidate termination clauses. The list is long and growing:

• For-cause clauses that deny ESA minimums. The most common defect. A clause that says "the employer may terminate for cause without notice or pay in lieu" violates the ESA, which only exempts employees guilty of "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned." The common law threshold for just cause is lower than the ESA's wilful misconduct standard — so a clause that denies entitlements at the common law cause threshold necessarily denies entitlements that would be owed under the ESA.

• Clauses that fail to reference benefit continuation. The ESA requires employers to continue benefit plan contributions during the statutory notice period. A termination clause that is silent on benefits may violate the ESA by omission.

• Clauses that conflate termination pay and severance pay. The ESA treats these as separate entitlements. A clause that rolls them together or fails to account for both may be defective.

• Clauses that use ambiguous language. Terms like "may provide" instead of "will provide," or language suggesting the employer has discretion about paying ESA minimums, are fatal.

The Post-Waksdale Case Law

Since 2020, the courts have applied Waksdale aggressively:

In Henderson v. Slavkin et al., 2022 ONSC 2964, the court voided a termination clause where the for-cause provision allowed termination "without any notice or payment whatsoever" — language that failed to preserve ESA minimums in cases that would not meet the ESA's higher "wilful misconduct" threshold.

In Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451, the Ontario Court of Appeal struck down termination provisions where the for-cause clause purported to disentitle the employee from "any payments, damages or notice of termination, whether under statute, common law or otherwise." The words "under statute" were the death blow — the clause explicitly contemplated overriding statutory entitlements.

In Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, the court applied Waksdale to a clause that failed to account for the employer's obligation to continue benefits during the notice period. Even though the clause otherwise tracked ESA minimum notice, the omission of benefit continuation rendered the entire termination scheme void.

In Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, the court dealt with a termination clause that limited entitlements to "only the minimum" required by the ESA. While seemingly compliant, the court found that the clause's use of "at its sole discretion" language in the for-cause provision violated the ESA because it suggested the employer — not the statutory standards — determined the threshold for cause.

Can Employers Fix This?

Yes, but it requires precision. A post-Waksdale termination clause must:

1. Separate without-cause and for-cause provisions and ensure both comply with the ESA independently
2. Explicitly preserve ESA minimums in every scenario — including for-cause termination
3. Reference benefit continuation during the statutory notice period
4. Account for both termination pay and severance pay as distinct entitlements
5. Avoid language that suggests employer discretion over statutory entitlements
6. Include a "saving" or "greater of" provision that ensures the employee receives at least their ESA entitlements regardless of what the clause otherwise provides
7. Track the ESA's specific language — using "wilful misconduct" rather than "just cause" for the for-cause threshold

Many employment lawyers now include explicit language stating: "In no event will the Employee receive less than their minimum entitlements under the Employment Standards Act, 2000, as amended from time to time." This is good practice, though courts haven't yet ruled definitively on whether such a saving clause can rescue an otherwise defective provision.

But here's the thing — whether your termination clause survives Waksdale depends on the exact wording. And most people can't tell the difference between an enforceable clause and a dead one. The language is technical. The case law is evolving. A single word — "may" instead of "will," "cause" instead of "wilful misconduct" — can be the difference between an 8-week payout and a 20-month one. That's what Blackline is for. Paste your termination clause and we'll tell you if Waksdale killed it.

The Retroactive Problem

Waksdale applies retroactively to all existing employment contracts. An employer that signed a contract in 2015 with a defective for-cause clause cannot rely on the without-cause clause in a 2025 termination. The contract doesn't become compliant with age.

This means thousands of employment contracts signed before Waksdale are now unenforceable on their termination provisions. Employers who haven't updated their contracts are operating without the protection they think they have.

The Real-World Impact

Waksdale has fundamentally changed the economics of wrongful dismissal litigation in Ontario. Before Waksdale, employers with termination clauses could often settle claims cheaply because the clause limited exposure. After Waksdale, plaintiffs' lawyers routinely attack the termination clause as a threshold matter. If the clause falls — and it usually does — the employer's exposure jumps from ESA minimum to common law reasonable notice.

The result: settlement values have increased, litigation has increased, and the incentive for employers to have their contracts professionally reviewed has never been stronger.

The Takeaway

Waksdale isn't complicated. The principle is simple: if any part of your termination scheme violates the ESA, the whole thing is void. The application is relentless: courts have applied it consistently since 2020, and the Supreme Court declined to intervene. If you've been terminated and your employer is pointing to a termination clause to justify a lowball offer, the first question to ask is whether that clause actually survives scrutiny. In most cases, it doesn't.