Lessons about Termination Clauses

by | Feb 14, 2018 | For Employees

As we have written before, termination clauses may have a significant effect on how much money you receive if you are terminated.

Many termination clauses attempt to limit the termination and severance pay an employee will receive. Throughout 2017, we saw several decisions from Ontario judges which decided termination clauses were not enforceable. In these cases, the courts often ordered the employer to pay more to the employee because the termination clause was poorly drafted.

In a recent decision, the Ontario Court of Appeal, went the other way. The Appeal Court upheld a termination clause finding that is was enforceable.

The Case: Nemeth v. Hatch Ltd., 2018 ONCA 7

In this case, Nemeth was employed by Hatch for 19 years.  When his employment was terminated, Hatch provided only the bare minimum payments under the Employment Standards Act (ESA): 8 weeks’ notice of termination and 19.42 weeks’ severance pay.

Nemeth’s contract included a termination clause stating that: “…employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.”

Based on previous court decisions, this clause appeared to be missing important elements.  It did not include statements about the ESA requirements of severance pay and benefit continuation. It also did not say that Nemeth gave up his rights at common law.

Likely because of this, Nemeth brought a wrongful dismissal action which went up to the Court of Appeal. The Court held that the termination clause did not need to have specific language removing the employee’s common law rights.  The Court found that the “intention to displace an employee’s common law notice rights” was evident from the contract. It also held that while the termination clause did not mention severance pay or benefit continuation that did not make the clause unenforceable.

Lessons for Employees

This clause was surprising to many employment lawyers and was a different approach than the Court of Appeal and other courts in Ontario took throughout 2017. The case highlights how important it is for employees to have their employment contracts reviewed by a lawyer.  Employees should not wait until after termination to try and fight about their contract.  Making sure that you understand the terms and conditions of your employment contract or offer letter and negotiating to improve the language can have significant financial benefits at a later date.

If you have been given an employment contract to sign, or have recently been terminated, you should consult a lawyer.  You can contact us at [email protected] or 647-204-8107 and one of our lawyers would be happy to assist you.

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.



Recent Posts

Laid Off and No Recall in Sight?

The Employment Standards Act the (“ESA”) contains a provision which allows for temporary lay-off. Pre Covid-19, the ESA told employers that they could lay off an employee for 13 out of 20 weeks, or 35 out of 52 weeks if the employer continues the employee’s benefits, for example.

read more

Paid Sick Leave? Sort of

With the numbers of COVID-19 cases rising again, especially in the GTA, many employees are asking me as a Toronto employment lawyer what happens if they become sick and they are forced to stay home for 14 days. Following the end of the Canada Emergency Response...

read more

Toronto Office

702 - 2 Bloor Street West,
Toronto, ON M4W 3E2

Barrie Office

277 - 92 Caplan Avenue,
Barrie, ON L4N 9J2

Collingwood Office

220 - 1 First Street
Collingwood, ON
L9Y 1A1



+1 (888) 640-1728


(866) 883-8445


[email protected]

Toronto Office

702 - 2 Bloor Street West, Toronto ON M4W 3E2

Barrie Office

277 - 92 Caplan Avenue, Barrie ON L4N 9J2

Collingwood Office

220 - 1 First Street, Collingwood, ON L9Y 1A1


Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!