Not all termination clauses are enforceable: Here’s One Way to Attack Them

Aug 15, 2016

Employers include a termination clause in your employment contract to take away your rights, i.e. to reduce the amount of termination pay you are entitled to receive. If your employment contract has a termination clause, you can be sure your employer will try to rely on it at the time of termination. There are circumstances however when the courts conclude that a termination clause is not enforceable. One example is when a significant amount of time has passed between the time the employment contract was signed and the time of termination.

Changed Substratum Doctrine

The changed substratum doctrine provides that if an employee enters into an employment contract with a termination clause then it is not enforceable if the important terms of the agreement concerning the employee’s responsibilities and status have significantly changed. The most common scenario occurs when the employee has received a series of significant promotions.

It is difficult to determine what kind of change or promotion would lead to a finding that the changed substratum doctrine applies. In one of the leading decisions on this doctrine, the judge noted that a contract of employment evolves over time and that incremental changes in the terms of employment are to be expected. Therefore, it must be a fundamental change that removes the substratum of an employment contract.

Lessons to be Learned

  1. If you apply for a job and are asked to sign an employment contract or sign back an offer of employment check to see whether or not there is a termination clause. If so and you don’t know whether you are giving up any rights, contact an employment lawyer.
  2. A termination clause can be enforceable when you first start work but may become unenforceable over time. If you are fired and your employer is relying on the termination clause in your employment contract to justify paying you your minimum entitlements under the Employment Standards Act and you signed the contract many years ago then you may want to ask an employment lawyer whether or not the termination clause is enforceable.
  3. The changed substratum doctrine is only one way to attack the enforceability of a termination clause. There are a number of other ways to attack one. If an employer is trying to rely on a draconian termination clause then consider having an employment lawyer review your case to see whether any of these attacks could be successful in your case.

If you have any questions regarding your employment contract, or whether the termination clause is enforceable, one of our lawyers would be happy to meet with you. Please call 647-204-8107 or email [email protected]

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