Over the last five years, the Ontario Court of Appeal has rendered several sweeping decisions that have broadly rendered termination provisions unenforceable. In fact, the courts held that enforceable termination provisions require “an exacting standard” that many fail to meet, despite best efforts. But at long last, there’s good news for employers: the Court of Appeal has upheld a termination provision that was both enforceable and effective in limiting an employee to their minimum statutory entitlements.
In the recent decision of Bertsch v. Datastealth Inc., the employee appealed a lower court decision that he was only entitled to his minimum statutory termination entitlements, pursuant to a written employment agreement. The Court of Appeal dismissed the employee’s appeal and upheld that the termination provision was enforceable and limiting. In particular, the employment agreement contained the following termination provision:
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 Ontario Employment Standards Act, 2000 and its Regulations, as may be amended from time to time (the “ESA”), 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.
The employment agreement also contained the following commonly called fail-safe provision:
If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time, you shall instead receive your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time.
This termination provision was enforceable and limiting for several reasons that we identified in our previous emailer. First, the provision clearly provided for all minimum statutory entitlements – not just monetary amounts. Second, the provision clearly provided that even if the employee was dismissed for just cause, they would still be provided with their minimum statutory entitlements. Third, the provision did not contain the language of “at any time”, which recent decisions have suggested may be problematic. Fourth, the provision explicitly stated that the minimum statutory entitlements are the only entitlements and there are no common law entitlements. Fifth, there was no problematic language elsewhere in the agreement. And sixth and finally, the agreement had a saving provision, confirming that if any part of the agreement fell short of statutory minimums, the employee would still receive their minimum statutory entitlements.
So what should employers do with this good news? Employers should take the time to review their employment agreements to ensure that they contain a proper and limiting terminating provision. That means ensuring that the termination provision provides for minimum statutory entitlements (even non-monetary entitlements and even where there is a for-cause dismissal), does not contain “at any time” language, expressly precludes common law entitlements, and is ideally backed by a fail-safe clause.
As some further good news for employers, the Canadian Government has introduced temporary EI measures allowing employees dismissed between March 30 and October 11, 2025, to receive both termination payments and EI benefits. This effectively provides a top-up of up to $695 per week for eligible employees. For those employees your business was already considering packaging out, this may be the ideal time to explore a mutual separation package, as the added top-up could make the opportunity more appealing.
For strategic advice on updating your employment agreements and handling dismissals, please contact our firm.
