Introduction
This year brought forward several significant employment law decisions. These rulings have clarified important legal principles surrounding termination clauses, the employer’s duty to provide a safe working environment, the employer’s duty to handle employee terminations with sensitivity and in good faith, fixed-term contracts, and more. Below, we summarize the key takeaways from the top cases of the year in the area of employment law.
Key Decisions
Hot off the Press! Court of Appeal Dismisses Dufault Appeal
1. Dufault v. Ignace (Township), 2024 ONCA 915
On December 19, 2024, the Ontario Court of Appeal issued a buzzer-beater decision, ending the year with yet another chapter in the Waksdale/Dufault termination clause saga. In Dufault v. Ignace (Township), the Court of Appeal dismissed the employer’s appeal, and upheld the decision of the Ontario Superior Court of Justice (reported on here) to award approximately $157,000 in damages to a former employee in relation to an invalid termination clause in a fixed-term contract.
The SCJ had ruled that the contract’s “for cause” termination clause allowed for termination based on a lower standard of misconduct than the “wilful misconduct” threshold established under the Employment Standards Act, 2000 (ESA). This clause also used open-ended language permitting termination for unspecified reasons, further violating the ESA. Specifically, this open-ended language provided that the employee could be terminated “at any time” and at the employer’s “sole discretion.”
As a result, both the “for cause” and “without cause” provisions were invalidated. Following the judicial precedent established in Waksdale v. Swegon North America Inc. (reported on here and here), the Court of Appeal upheld the SCJ’s original determination that when one termination provision contravenes the ESA, all termination provisions in the contract are rendered unenforceable.
The Court of Appeal provided as follows in this regard:
[25] Given our conclusion that the “for cause” termination clause of the employment contract is unenforceable as contrary to the ESA and that, pursuant to Waksdale, this renders all of the termination provisions unenforceable, it is not necessary to consider the appellant’s arguments that the motion judge erred in finding the “without cause” termination clause also unenforceable as contrary to the ESA, and we expressly do not rule on that submission. The appellant argued that the motion judge’s findings in relation to the “without cause” termination clause may affect other employment contracts. In our view, resolution of the issues the appellant raises regarding the “without cause” termination clause should be left to an appeal where it would directly affect the outcome.
As noted in our earlier reporting on the SCJ’s decision in this case (found here), these findings are of great concern to employers as “any time” language is commonly included in termination clauses. This decision is the latest in a long line of cases expanding the categories of clauses that are inconsistent with the ESA.
Key Lesson: The Dufault decisions serve as a critical reminder to employers of the risks associated with improperly drafted termination clauses. Employers must ensure that all provisions align with ESA standards, as non-compliance can result in the invalidation of the entire termination framework and expose employers to significant damages. This case underscores the importance of carefully drafting employment agreements and regularly reviewing them in light of evolving case law.
Dufault Part One: “At Any Time” Termination Clause Language Invalid
2. Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029
In Dufault v. The Corporation of the Township of Ignace, the precursor to the Ontario Court of Appeal’s Dufault decision, discussed above, the Ontario Superior Court struck down a termination clause that, among other things, allowed the employer to terminate an employee “at any time.” The Court found this language was overly broad and violated the ESA, rendering the clause invalid and unenforceable. The employer appealed the Superior Court’s ruling to the Ontario Court of Appeal, which, as we now know, dismissed the appeal and upheld the SCJ’s decision. The details regarding this most recent ruling are discussed above.
Key Lesson: An employer cannot terminate an employee “at any time.” Seeking to do so through a termination clause that includes this language may, if challenged, render the entire termination framework in a contract invalid. Employers must take care to draft termination clauses with precision to ensure validity and compliance with the ESA minimum standards.
For more information on the SCJ’s decision in Dufault, please see our original reporting on this case here.
Waksdale Strikes Again
3. De Castro v. Arista Homes Limited, 2024 ONSC 1035
In early 2024, the Ontario Superior Court, following the precedent in Waksdale, struck down a termination provision for violating the ESA. The decision arose from a motion for summary judgment brought by the plaintiff.
The Court helpfully bolded the problematic language in the plaintiff’s employment contract:
[13] The plaintiff’s employment contract provides that:
If you are terminated for Cause or you have been guilty of wilful misconduct, disobedience, breach of Employment Agreement or wilful neglect of duty that is not trivial and has not been condoned by ARISTA, then ARISTA will be under no further obligation to provide you with pay in lieu of reasonable notice or severance pay whether under statute or common law. For the purposes of this Agreement “Cause” shall include your involvement in any act or omission which would in law permit ARISTA to, without notice or payment in lieu of notice, terminate your employment. (Emphasis added)
The Court ruled this clause unenforceable because it improperly broadened the definition of “cause” beyond the ESA’s narrow scope by including “breach of Employment Agreement” as a justification for termination without notice. To illustrate the issue, the Court considered a hypothetical example, where an employee working outside the specified hours in their contract could be unfairly terminated without notice under this provision.
In addition, the Court ruled that the defendant had failed to meet its burden of proof regarding the plaintiff’s failure to mitigate. The defendant did not provide sufficient evidence of comparable job opportunities or assist in the plaintiff’s job search through means like job leads, counselling, or reference letters.
Key Lesson: This decision underscores the importance of drafting ESA-compliant termination provisions and fulfilling the employer’s burden in mitigation claims. As the next case shows, sometimes less is more.
ESA-Only Termination Clause found Valid in Rare Decision
4. Bertsch v. DatastealthInc., 2024 ONSC 5593
In contrast to the Dufault cases and the De Castro case, detailed above, the case of Bertsch v. Datastealth Inc. provides an example of a termination clause that held up against judicial scrutiny. Here, the Ontario Superior Court upheld the validity of a termination clause that was clear, unambiguous, and compliant with the statutory minimums under the ESA.
The termination clause in this case provided as follows:
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.
11.(a) If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owning (sic) 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…
This case highlights the importance of ensuring that termination clauses are precise and free of language that could be deemed contrary to the ESA. Unlike clauses that attempt to give employers overly broad, unilateral discretion to terminate employees, this decision demonstrates how proper drafting can withstand a legal challenge.
Key Lesson: Termination clauses that are carefully crafted and compliant with the ESA can provide employers with legal certainty and reduce the risk of disputes.
For more information, please see our original reporting on this case here.
Validity of Fixed-Term Contracts Clarified
5. Kopyl v. Losani Homes (1998) Ltd., 2024 ONCA 199
In Kopyl v. Losani Homes (1998) Ltd., the Ontario Court of Appeal addressed the enforceability of fixed-term employment contracts and upheld their validity. The Court emphasized that fixed-term contracts can effectively limit an employer’s obligations at the end of the term if they are clear, explicit, and compliant with the ESA.
Unlike indefinite contracts, which often lead to disputes over reasonable notice, fixed-term agreements avoid uncertainty by clearly defining the employment period and any associated obligations. This case serves as a reminder of the value fixed-term contracts can bring to specific employment scenarios, provided they are drafted with care.
Key Lesson: Fixed-term contracts are a useful tool for employers, but they must be drafted clearly and in compliance with the ESA to avoid disputes.
For more information, please see our original reporting on this case here.
Seasonal Employees and Notice Periods
6. Smith v Lyndebrook Golf Inc., 2024 CanLII 103671
In Smith v. Lyndebrook Golf Inc., the Ontario Superior Court (Oshawa Small Claims Court) awarded five months’ notice to a seasonal employee who had worked only one month before being terminated mid-season. The court recognized that the timing of the termination (i.e. mid-season) significantly limited the employee’s ability to find comparable work, which contributed to the generous notice period.
This case demonstrates that short service does not always result in minimal notice period entitlements, especially in situations where seasonal or specialized work limits the employee’s ability to mitigate their losses. It also highlights the importance of having clear, enforceable termination clauses in seasonal employment agreements.
Key Lesson: Employers of seasonal or short-term employees should ensure their contracts are carefully drafted to include enforceable and appropriate termination provisions that account for the unique nature of seasonal work.
Aggravated Damages for Termination After Surgery
7. Krmpotic v. Thunder Bay Electronics Limited, 2024 ONCA 332
In Krmpotic v. Thunder Bay Electronics Limited, the Ontario Court of Appeal upheld $50,000 in aggravated damages awarded to an employee who was terminated immediately after returning from surgery. The court found that the termination was carried out in bad faith, given the employee’s vulnerable physical condition and inability to mitigate his losses during the notice period.
This case reaffirms the courts’ willingness to penalize employers for insensitive or bad-faith terminations that cause undue harm to employees. Employers must act with fairness and compassion when terminating employees, especially in circumstances where the employee is in a vulnerable position due to health reasons.
Key Lesson: Employers should ensure that employee terminations are carried out in a manner that is sensitive and in good faith, particularly in situations involving health or personal vulnerability.
Saving Clauses Cannot Fix Non-Compliant Termination Provisions
8. Wilds v. 1959612 Ontario Inc., 2024 ONSC 3452
In Wilds v. 1959612 Ontario Inc., the Ontario Superior Court confirmed that saving clauses cannot salvage termination clauses that otherwise violate the ESA. The Court emphasized that employers cannot rely on generic language to “fix” non-compliant clauses after the fact.
The decision reinforces the principle that termination provisions must be clear, enforceable, and compliant with the ESA at the time of drafting. Saving clauses that attempt to retroactively align a clause with statutory minimums under the ESA are unlikely to be upheld in court.
Key Lesson: Employers must ensure termination provisions are compliant from the outset, as saving clauses cannot retroactively “fix” an unlawful termination provision.
Judicial Review of Arbitration Decisions
9. Metrolinx v. Amalgamated Transit Union, Local 1587, 2024 ONSC 1900
In Metrolinx v. Amalgamated Transit Union, Local 1587, the Ontario Superior Court reviewed an arbitrator’s decision and upheld their findings. The Court reaffirmed that judicial review of arbitration decisions will only succeed if the arbitrator’s decision is unreasonable or fails to meet applicable legal standards.
This decision underscores the deference courts give to arbitrators and the limited scope for judicial intervention in unionized workplaces. As such, employers in unionized workplaces should approach arbitration as the final step in any dispute resolution process.
Key Lesson: Employers in unionized environments must respect arbitration as the primary dispute resolution mechanism and understand the limited grounds for judicial review.
Employer Ordered to Pay $175,000 For Failure to Protect Employee
10. Stride v. Syra Group et al., 2024 ONSC 2169
In Stride v. Syra Group et al., the Ontario Superior Court awarded $175,000 in damages and eight months’ notice to a former employee who was wrongfully dismissed while on medical leave. The employee, a superintendent, faced ongoing threats and harassment from tenants. Despite repeatedly reporting these incidents, her employer, a property management company, failed to investigate her complaints or take meaningful steps to address her safety concerns. Instead, the employer’s response was limited to suggesting she call the police, a wholly inadequate measure in the circumstances.
The harassment led to severe mental health challenges, forcing the employee to take medical leave. Less than four months into her leave, the employer terminated her employment, claiming frustration of contract due to her inability to work. The Court rejected this position, finding that the employee’s medical leave was directly linked to the unsafe work environment that the employer failed to address. The Court ruled against the employer and found that their failure to investigate the employee’s complaints, implement adequate workplace safety measures, or provide appropriate workplace safety training contributed significantly to their liability.
Key Lesson: Employers must take proactive steps to prevent and address unsafe working conditions to protect employees and avoid liability.
For more information, please see our original reporting on this case here.
Final Takeaways
The employment law decisions of 2024 reinforced critical employer responsibilities across a variety of workplace issues, from contract compliance to termination practices. Key takeaways include the following:
- Termination clauses must be clear, precise, and fully compliant with the ESA to avoid invalidation (Dufault v. Ignace; De Castro v. Arista Homes Limited).
- Saving clauses cannot retroactively fix non-compliant termination provisions (Wilds v. 1959612 Ontario Inc.).
- ESA-compliant termination clauses can withstand judicial scrutiny and reduce the risk of disputes when drafted carefully (Bertsch v. Datastealth Inc.).
- Employers must thoroughly investigate employee complaints and address workplace safety concerns, and proactive workplace safety policies and training are essential to meeting legal obligations (Stride v. Syra Group).
- Fixed-term contracts must be explicit and ESA-compliant to effectively limit employer obligations (Kopyl v. Losani Homes).
- Terminations must be handled with good faith and sensitivity, particularly for vulnerable employees (Krmpotic v. Thunder Bay Electronics).
- Short-term and seasonal employees may still be entitled to significant notice periods depending on their ability to mitigate losses (Smith v. Lyndebrook Golf Inc.).
- In unionized workplaces, absent an unreasonable or unlawful decision, arbitration will be the primary and final dispute resolution mechanism (Metrolinx v. Amalgamated Transit Union).
This publication provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hunter Legal LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hunter Legal LLP.