Employers Win: Ontario Court of Appeal Upholds ESA-Minimum Termination Clause
June 30, 2025
| By
Aileen Gardiner
Employment Standards
Bottom Line
On May 16, 2025, the Ontario Court of Appeal in Bertsch v Datastealth Inc., 2025 ONCA 379 (CanLII) upheld a termination clause limiting employees’ termination entitlements to the minimum amounts pursuant to the Employment Standards Act, 2000 (the “ESA”). This recent case brings positive news for employers within the current legal landscape surrounding termination clauses.
The Ontario Court of Appeal confirmed that the termination clause in question, when reasonably interpreted, clearly and unambiguously excluded the employee’s entitlements to common law reasonable notice, limiting the employee’s termination entitlements to those required by the ESA.
This case provides helpful guidance to employers in drafting termination clauses that can effectively limit an employee’s entitlements upon termination while withstanding legal scrutiny.
Background and Ontario Superior Court Decision
As we wrote previously in our website article on the Ontario Superior Court decision, the termination clause in question stated:
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,…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 “failsafe” clause, dealing with the potential for any invalidity of the agreement:
11.(a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning under the [ESA] …you shall instead receive your minimum entitlements under the [ESA]…
(h) This Agreement constitutes the complete understanding between you and the Company with respect to your employment, and no statement, representation, warranty or covenant have been made by you or the Company with respect to this Agreement except as expressly set forth herein. The parties have expressly contemplated whether there are any additional implied duties owed by the Company to you, at common law or otherwise, outside the written terms of the Agreement or under statute and confirm that there are no such obligations. This Agreement shall not be altered, modified, amended or terminated unless evidenced in writing by the Company.”
(k)… The invalidity, for any reason, of any term of this Agreement shall not in any manner invalidate or cause the invalidation of any other term thereof…”
The employee alleged that the relevant termination provision was unenforceable, arguing that the termination language would permit the employer to terminate employment without notice for cause short of “wilful misconduct, disobedience or wilful neglect of duty.” As discussed in our previous article, employees who are terminated for misconduct that does not rise to the level set out in the ESA will still be entitled to notice of termination pursuant to the ESA.
The Ontario Superior Court concluded that the provisions in question did not result in any breach of the ESA. Specifically, the Ontario Superior Court noted that the provisions were clear and unambiguous in limiting the employee’s entitlements upon termination such that the employee’s entitlement to common law notice was entirely ousted.
The employee appealed the Ontario Superior Court decision to the Ontario Court of Appeal, arguing that an “ordinary person” could misunderstand the termination provision and incorrectly assume that they could be terminated without notice for misconduct short of wilful misconduct, disobedience or wilful neglect of duty.
The Ontario Court of Appeal Decision
The Ontario Court of Appeal dismissed the appeal, thereby upholding the termination clause as clearly and unambiguously limiting the employee’s entitlements upon termination to the minimum entitlements pursuant to the ESA.
The Court of Appeal rejected the appellant’s argument, noting that the issue in interpreting the termination provision was “not whether an ordinary person might arrive at an incorrect interpretation of the termination provisions […] but how the agreement can be reasonably interpreted.” When reasonably interpreted, the Court of Appeal held that the termination provision did not depart from the minimum standards guaranteed by the ESA, rendering it enforceable.
Takeaways
This case provides further clarity and guidance for employers in drafting termination clauses in a way that effectively limits employees’ entitlements upon termination. The Court of Appeal confirms that employers may use clear and unambiguous language to validly limit employees’ termination entitlements to the minimum amounts required by the ESA.
We encourage employers to consult our firm to ensure that their termination clauses are up to date and aligned with this recent decision.
Need More Information?
For more information or assistance with drafting employment agreements, contact Aileen Gardiner at AGardiner@filion.on.ca or your regular lawyer at the firm.
