New Supreme Court Ruling: How It Impacts Your Employment Contract

If part of your termination clause contains violations of Employment Standards legislation (in your province or under the Canada Labour Code for federally-regulated employees), courts may now invalidate the entire provision, not just problematic sections. This opens up the potential for restrictive severance terms to also be struck out, which may mean you can receive common law damages instead of contractual minimums. Even minor flaws like broad “with cause” definitions or “at any time” language can void your entire termination clause, potentially entitling you to significantly more notice or pay in lieu.

What Denial of Leave to Appeal Means for Employees

When the Supreme Court of Canada, or any appellate court, denies leave to appeal, it effectively validates the lower court’s decision and establishes that ruling as binding law.

The recent denial of leave to the Supreme Court of Canada in Dufault v. Ignace (Township), means that the Ontario decision in that case stands, which extends significant protection against unfair termination clauses.

If your employment contract contains any provision that violates the Employment Standards Act, the entire termination section may become unenforceable.

This can include restrictive clauses that limit your severance to minimum standards.

Even seemingly minor issues in the “with cause” portion of a termination provision – like language stating your employer can terminate “at any time” – can invalidate all of the termination provision, both with and without cause.

Should you face termination without cause, and your contract contains wording that could violate Employment Standards legislation, you might be entitled to common law damages instead of contractual minimums, potentially resulting in substantially higher compensation.

Understanding the “All or Nothing” Contract Law Rule for Termination Clauses

Because one flawed clause can topple your entire termination provision, you need to understand how courts apply this “all or nothing” principle.

When any part of your employment contract’s termination provisions violates Employment Standards legislation, courts won’t just strike out the problematic section – they’ll invalidate the entire termination provision.

This means if your “for cause” clause doesn’t meet legislative standards, your “without cause” clause falls too, even if it’s perfectly legal. There is no picking and choosing of which parts survive.

Courts take this strict approach because they view employment contracts skeptically, recognizing employees’ weaker bargaining position.

If your entire termination provision becomes unenforceable, you may be able to claim for common law notice or, in fixed-term contracts, payment for the contract’s full remaining duration.

Why Your “With Cause” Termination Clause May Invalidate the “Without Cause” Clause

The specific wording in your “with cause” termination clause poses a serious risk to your entire employment contract.

Courts have consistently ruled that if any termination provision violates Employment Standards legislation, the termination clause(s) as a whole become unenforceable.

Here’s what makes “with cause” clauses problematic:

1. Broader definitions than legislation allows – Your contract might include “failure to perform duties” while the legislation requires “wilful misconduct”
2. Missing statutory protections – Clauses allowing termination “at any time” ignore protected periods like parental leave
3. Vague language – Terms like “employer’s sole discretion” contradict legislative restrictions

The Dufault decision confirms that one defective clause can invalidate everything.

This would include negotiated severance limits, meaning employers could face potential liability for the common law notice or the entire remaining contract term.

The Stricter Standard: Wilful Misconduct vs. Just Cause Under the law

Understanding the difference between “wilful misconduct” and “just cause” could save your company from significant financial liability.

Employment Standards legislation sets a much higher bar for termination without notice than common law. While “just cause” includes poor performance or misconduct, the legislated standard of “wilful misconduct” (or similar wording) requires deliberate, intentional wrongdoing that’s not trivial.

In Dufault, the employer’s termination clause failed because it included broader grounds like “failure to perform duties” – which did not meet the Ontario ESA’s strict standard. This means that termination without severance for simple incompetence or mistakes is highly risky. The employee must have engaged in purposeful bad behaviour, or you can clearly demonstrate that you have taken sufficient steps – warnings, training, coaching, and clearly indicating the risk to their employment should improvement not occur, ALL off which needs to be documented in detail – before termination for cause can occur that may withstand a Court’s scrutiny.

This distinction matters because if your contract’s “for cause” provision doesn’t match the narrow definition in the applicable legislation, courts may strike down all your termination clauses, potentially exposing you to damages for the entire contract term or for common law notice.

How “At Any Time” Language Can Make Your Termination Clause Unenforceable

When employers include language stating they can terminate “at any time” at their “sole discretion,” they’re inadvertently creating a legal trap that can invalidate their entire termination provision.

Employers who claim unlimited termination rights may accidentally void their entire termination provision in the contract, triggering higher common law damages.

The Employment Standards Legislation sets out a number of periods when employers CANNOT terminate employees:

1. Protected leaves – You can’t be fired while on pregnancy, parental, or sick leave
2. Reprisal protections – Your employer can’t terminate you for exercising legal rights (such as under Employment Standards, Health & Safety, Human Rights)
3. Notice requirements – Termination must follow statutory minimums

The Dufault case confirmed that “at any time” language violates these protections.

When one part of your termination clause breaches the ESA, courts void the entire provision.

This means employees could receive common law damages instead of limited contractual amounts—potentially worth considerably more compensation.

Fixed-Term Contracts: When You May Be Entitled to Full Contract Value

Fixed-term employment contracts create specific legal obligations that differ greatly from standard indefinite-term agreements.

When you sign a fixed-term contract, you’re fundamentally guaranteed employment for the entire duration unless there’s a valid termination clause.

If your employer terminates you without cause and the contract’s termination provisions are unenforceable, you may be entitled to compensation for the remainder of your contract term.

In Dufault’s case, she received damages for the full 101 weeks remaining on her contract—worth $157,071.57.

This substantial award demonstrates why properly drafted termination clauses matter.

Without enforceable provisions limiting severance, employers must pay out the entire contract value.

For employees, this means if you’re wrongfully dismissed from a fixed-term position with invalid termination language, you could receive considerably more compensation than statutory minimums.

Red Flags in Your Employment Agreement That Courts Can, and Often Will, Strike Down

Even though your employment contract may look professionally drafted, certain phrases and provisions will render your termination clauses completely unenforceable in court.

Watch for these three red flags that courts strike down fairly consistently (particularly in Ontario, where this line of case law was initially developed):

1. “At any time” language – This phrase ignores legislated protections during statutory leaves and violates your right to take protected time off.
2. “Sole discretion” wording – Employers can’t have absolute discretion since the legislation restricts when terminations can occur, and what reasons are considered valid cause for termination without notice.
3. Broader “cause” definitions – If your contract defines cause beyond “willful misconduct” or other legislated standards, the entire termination provision may be considered void.

In most cases, when courts find any violation, they’ll invalidate the entire termination clause under the Waksdale principle.

This means employees could receive common law damages instead of limited ESA minimums.

Steps to Take If Your Employer Uses Invalid Termination Language

If you’re reviewing your employment contract and spot termination language that allows your employer to fire you “at any time” or “at their sole discretion,” you’ve likely identified a provision that violates Employment Standards legislation.

These phrases ignore statutory protections like parental leave and protection from reprisal. Document the problematic language and consult an employment lawyer immediately.

Don’t sign amendments accepting these terms. If you’re already bound by such provisions, you’ll have stronger grounds for challenging any termination.

Courts consistently strike down these clauses, potentially entitling you to greater compensation than the contract specifies.

Best For: Employees who have signed or are being asked to sign employment contracts with termination clauses that may violate the Employment Standards Act.

Pros:

• Courts consistently favour employees when termination clauses contain “at any time” or “sole discretion” language, leading to higher compensation awards
• Even if only one part of a termination provision violates the ESA, the entire termination clause may become unenforceable
• Employees terminated under invalid fixed-term contracts may receive full wages and benefits for the entire contract duration
• Employees in indeterminate positions may be entitled to full common law notice periods

Cons:

• The enforceability of “without cause” termination clauses remains legally uncertain pending further court decisions
• Employers may attempt to remedy invalid clauses through contract amendments, requiring ongoing vigilance from employees

If your employer attempts to change your contract, consult a lawyer before signing, as there are legal requirements that must be met.  If you sign immediately, you could cost yourself significant amounts of money at termination.

How Taylor Janis Workplace Lawyers Can Help

When you’re facing a termination that involves problematic contract language or you need your employment agreement reviewed, Taylor Janis Workplace Lawyers bring specialized expertise in employment law across Alberta and BC.

Our team can help you:

1. Analyze your termination provisions – We’ll identify any language that violates the ESA, including “at any time” or “sole discretion” clauses that courts have ruled unenforceable.
2. Calculate proper severance – If your termination clause is invalid, you may be entitled to considerably more compensation than your employer offered.
3. Navigate wrongful dismissal claims – We’ll determine whether you have grounds for additional damages based on the Dufault precedent.

With a dedicated focus on workplace law and employee rights, we recognize how recent court decisions impact your situation.

Our lawyers stay current on evolving case law to protect your interests effectively.

Conclusion

Your employment contract’s termination provisions matter more than ever. If you’ve spotted problematic language like “at any time” or overly broad just cause definitions, don’t wait. Review your contract now and identify potential violations. You could be entitled to considerably more compensation than you realize. Contact experienced employment lawyers who understand this precedent and can assess whether your termination clauses are enforceable. Taking action today protects your rights and financial future tomorrow.

PRIVACY NOTICE:  Any information you provide to our office — whether your personal information or employment/employer details — will be treated as strictly confidential and will not be disclosed to your employer or to any other third party. So, please be reassured that you can talk openly to our capable Intake Paralegals worry free. Fill out an Online Inquiry or call us now, your information will be in safe and helping hands.

The Legal Review Process by Taylor Janis Workplace Law

• Taylor Janis strives for high-quality, legally verified content.
• Content is meticulously researched and reviewed by our legal writers/proofers.
• Details are sourced from trusted legal sources like the Employment Standards Code.
• Each article is edited for accuracy, clarity, and relevance.
• If you find any incorrect information or discrepancies in legal facts, we kindly ask that you contact us with a correction to ensure accuracy.