Is Your Termination Clause Enforceable? Waksdale, Dufault, and What They Mean for Your Severance

The termination clause usually determines more of an Ontario employee's severance outcome than any other contractual provision. If the clause is enforceable, it may limit the employee to something close to the minimums under the Employment Standards Act, 2000, often a matter of weeks. If the clause is unenforceable, the common law right to reasonable notice applies instead, and courts frequently measure that entitlement in months. The gap between those two outcomes can be worth tens of thousands of dollars or more.

This article explains why so many termination clauses fail, the main lines of decisions Ontario courts apply when they assess them, and what happens when a clause does not hold. It also explains why the analysis only ever runs in one direction: courts and lawyers can identify reasons a clause fails, but no plain reading can confirm that a clause is valid. The stakes come first. An estimate of the common law severance range takes a few minutes and sets the statutory floor against the common law entitlement.

Why does the termination clause decide your severance outcome?

The termination clause decides which of two measures governs an Ontario employee's severance: the statutory floor under the Employment Standards Act, 2000, or the common law right to reasonable notice. An enforceable clause can limit the employee to weeks. An unenforceable clause restores the common law entitlement, which courts frequently measure in months.

Ontario employment law measures a terminated employee's entitlement in two very different ways. The first is the statutory floor. The Employment Standards Act, 2000 requires termination pay of one week per completed year of service (after three months of employment, capped at eight weeks), plus statutory severance pay for qualifying employees: those with five or more years of service, where the employer has an Ontario payroll of $2.5 million or more, receive one week per year, prorated, capped at 26 weeks. The employer must also continue benefits through the statutory notice period. These amounts are minimums that no contract can undercut.

The second measure is the common law. Absent an enforceable clause saying otherwise, every employee has an implied contractual right to reasonable notice of termination, which courts assess using the Bardal factors: age, length of service, character of employment, and availability of similar work. Common law notice has no statutory cap and routinely exceeds the ESA amounts by a wide margin. The difference between ESA minimums and the common law entitlement is the core of most severance negotiations.

Employers use the termination clause to try to displace the common law and substitute something smaller, usually the ESA minimums or a modest formula. That substitution only works if the clause is enforceable. Ontario courts interpret termination provisions with a protective, employee-favourable approach, and they have found defects in a large share of the clauses that have come before them. The enforceability question is therefore the pivot: it decides which of the two measures governs.

How does the Waksdale line invalidate a termination clause?

Under the Waksdale line of decisions, Ontario courts read a termination provision as a single scheme. If any part of the provision violates the Employment Standards Act, 2000, such as a defective for-cause clause, courts have held the entire provision unenforceable, including parts that would comply with the statute on their own.

The Waksdale line is the most consequential development in this area. Many contracts contain a for-cause clause purporting to deny all entitlements on termination for "cause" as the common law understands that term. The ESA, however, disentitles an employee from statutory payments only on the narrower standard of wilful misconduct that is not trivial and not condoned, a higher bar than common law cause. A for-cause clause drafted to the common law standard therefore risks purporting, in some circumstances, to pay less than the ESA requires. The Court of Appeal narrowed that risk in 2026: a cause definition broader than the statutory standard does not sink a provision that expressly preserves the ESA entitlements regardless, and the defect arises only where the drafting would deny those entitlements for conduct short of wilful misconduct. Under the Waksdale line, that defect does not stay contained to the for-cause clause. It takes down the without-cause clause with it, even if the without-cause clause would have complied with the ESA on its own, and even if the employer never alleges cause.

The consequence reaches employees who might assume the doctrine has nothing to do with them. An employee terminated without cause, holding a without-cause clause that appears ESA-compliant on its face, may still be entitled to full common law reasonable notice because of defective for-cause language elsewhere in the provision, language the employer never invoked. This interaction between cause language and clause enforceability is one of several reasons the for-cause standard in Ontario matters even to employees dismissed without any allegation of misconduct.

Do "at any time" and "sole discretion" clauses still fail?

No, and the argument is now closed. The Superior Court decision in Dufault treated a claimed right to terminate at any time as overstating the employer's rights under the Employment Standards Act, 2000. Ontario's Court of Appeal rejected that reading in 2026, holding the words mean only that a termination is legally effective whenever it occurs, provided the employee receives their statutory entitlements.

The ruling turns on reading the whole agreement rather than the phrase in isolation. Where the contract shows an objective intention to respect the statutory floor, the words "at any time" do not put the clause offside. Commentary written before August 2026 still describes the phrase as a standalone defect, and the Court of Appeal had in fact declined to decide the point when Dufault reached it, so the proposition was never appellate authority. Our report on the Baker, Li, and Wigdor decisions sets out what the Court held.

The change removes one argument rather than the analysis. Every other route to invalidity survives it: for-cause language drafted to the common law standard, amounts that fall below the statutory minimums, and benefits that stop before the statutory notice period ends. The Waksdale principle also continues to apply, so a defect elsewhere in the provision can still take down a clause whose "at any time" language would now survive on its own. Whether a particular clause holds depends on its exact wording and on the current state of the law, which is why this question belongs to legal review rather than a plain reading.

What replaces a termination clause that is void?

A void termination clause is replaced by the common law implied term of reasonable notice, not by the ESA minimums the clause tried to approximate. Under Machtinger, a clause providing less than the statutory minimums is void, and courts assess the employee's entitlement using the Bardal factors, with no statutory cap.

Machtinger, the oldest doctrine in this area, answers the question that matters most to remedies. Employers sometimes suggest the opposite of its rule: that a failed clause leaves the employee with the statutory minimum the clause was trying to approximate. That is not the law. Courts treat a void clause as if the parties never wrote it. A clause that promised two weeks per year but failed on a technical defect does not leave the employee with two weeks per year, or with the ESA formula. It leaves them with the full common law range. This remedial rule gives clause defects their financial significance, and it is deliberate: it removes any incentive for employers to draft aggressive clauses and rely on the statute as a safety net.

What other defects make termination clauses unenforceable?

Ontario courts have found termination clauses unenforceable on recurring grounds beyond the named doctrines, including clauses that fail to continue benefits through the statutory notice period and clauses that omit statutory severance pay. All of these defects rest on one principle: a clause that provides, or could provide, less than the ESA requires is void.

Benefits gaps are one recurring pattern. The ESA requires an employer to continue benefit plan contributions through the statutory notice period. A clause that provides pay in lieu of notice but says nothing about benefits, or that expressly limits the employee to salary alone, may in some circumstances provide less than the statute requires. Courts have treated benefits gaps of this kind as defects.

Statutory severance pay is another. Termination pay and severance pay are separate ESA entitlements, and a clause drafted only around notice or termination pay may fail to account for severance pay for qualifying employees. A clause that caps the employee's total entitlement at an amount that could fall below the combined statutory entitlement contains a defect, even if the employee in question would not currently qualify for severance pay. The question is what the clause purports to permit, not what happened.

The recurring defect patterns share a single statutory root.

Defect pattern	Why it violates the ESA
For-cause language drafted to the common law standard	Purports to deny statutory payments in circumstances where the ESA's narrower wilful misconduct standard would still require them
"At any time" or "sole discretion" language	No longer a defect on its own. The Superior Court in Dufault treated it as claiming a right the ESA restricts; the Court of Appeal rejected that reading in 2026
Amounts below the statutory minimums	Provides less termination pay or notice than the ESA floor, which no contract can undercut
Benefits gap	Limits the employee to salary alone where the ESA requires benefit continuation through the statutory notice period
Omission of statutory severance pay	Caps the total entitlement at an amount that could fall below the combined statutory entitlement for qualifying employees

These examples illustrate the pattern rather than exhaust it. The grounds keep growing as courts examine new wording, and they interact with one another. Any list of defects is a snapshot, not a checklist.

What happens to your severance when the clause fails?

When a termination clause fails, courts assess the employee's entitlement as though the contract contained no termination clause at all. The implied term of reasonable notice governs, assessed on the Bardal factors: age, length of service, character of employment, and availability of similar work. Common law damages generally reflect full compensation over the notice period.

Typical ranges run from a few months for junior, short-service employees to twelve to twenty-four months for long-service senior employees, and exceptional cases exceed that.

The financial difference is usually substantial. Beyond base salary, damages can include benefits, bonus, commissions, and pension contributions, subject to the terms of the relevant plans and the duty to mitigate. An employee whose clause limited them to eight weeks, and whose common law range is twelve months, has a claim measured by the difference. That gap is the substance of most wrongful dismissal claims: the dismissal itself may have been lawful, but the employer's offer fell short of the entitlement.

An employee reviewing a severance offer should therefore never treat the offer as final merely because it matches what the contract says. The contract only controls if the clause holds, and whether it holds is precisely the question in dispute.

Is a clause with no visible defect enforceable?

No. The analysis of a termination clause runs in one direction only: courts and lawyers can identify reasons a clause fails, but no plain reading can confirm that a clause is enforceable. The absence of an obvious defect is not evidence of validity, because the grounds of invalidity are numerous, evolving, and often turn on subtle wording.

The reasons are structural. The grounds of invalidity are numerous and continue to develop, so a clause drafted carefully against last year's decisions may be vulnerable to a ground recognised this year. The defects often turn on subtle wording: a phrase that reads innocuously to a non-lawyer may be precisely the language courts have found to violate the ESA. And under the Waksdale line, the defect need not sit in the part of the clause the employer relies on; it can sit anywhere in the termination provision. A reader who scans the without-cause clause and finds it unobjectionable has not assessed the provision the way a court would.

No article, including this one, can tell you that your clause is enforceable. What a general article can do is explain why so many clauses fail and why the common law range stays relevant in every case until a lawyer has properly assessed the clause. The assessment itself requires legal review of the exact wording of the specific contract, because wording is everything in this area.

What should you do next?

The stakes come first. The common law severance range for a given age, tenure, role, and job market, set against what the clause and the offer provide, shows how much weight the clause is carrying. Where the two numbers sit far apart, that clause warrants legal review before anyone signs anything.

If the two numbers are close, the enforceability question matters less. If they are not, get a legal review of the clause itself before you accept any offer or sign any release. Enforceability turns on exact wording and current law, so the task belongs to legal review rather than self-assessment. Many employees then proceed by negotiation: a demand letter setting out the common law entitlement and the grounds for questioning the clause can prompt a materially improved offer, because employers and their counsel understand the litigation risk an uncertain clause creates. Employees who prefer professional representation from the outset, or whose negotiations do not resolve the matter, should consult a licensed Ontario employment lawyer to assess the clause and the claim as a whole.

Frequently Asked Questions

Q1: What makes a termination clause unenforceable in Ontario?

A termination clause is unenforceable if it violates, or could in some circumstance violate, the minimum standards of the Employment Standards Act, 2000. Ontario courts have found several recurring defects: for-cause language that denies statutory entitlements more broadly than the ESA permits, clauses that provide less than the statutory minimums, clauses that fail to continue benefits through the statutory notice period, and clauses that omit statutory severance pay. Under the Waksdale line of decisions, courts have held that a defect in any part of the termination provision makes the entire provision unenforceable, including the parts that comply on their own. The exact wording of the clause decides whether it contains a defect, which is why legal review of the actual contract language is essential.

Q2: If my contract says I only get ESA minimums, is that all I am owed?

Not necessarily, because the contract only controls if its termination clause is enforceable, and enforceability is a contested legal question. Ontario courts have found a large share of the termination clauses they have examined unenforceable for violating the Employment Standards Act, 2000 in some respect. If the clause fails, the common law right to reasonable notice applies. Courts frequently measure that entitlement in months rather than weeks, and no statute caps it. An employee with a contract limiting them to ESA minimums should never assume the minimum is their ceiling. The common law range stays relevant in every case until a lawyer has assessed the clause, and only a review of the specific wording can make that assessment.

Q3: What is the Waksdale line of decisions?

The Waksdale line of decisions holds that courts read a termination provision in an employment contract as a whole. If any part of the provision violates the Employment Standards Act, 2000 (for example, a for-cause clause that purports to deny statutory entitlements in circumstances where the ESA would still require payment), courts have held that the entire termination provision is unenforceable. The provision fails even if the employer never relies on the defective part, and even if the without-cause portion would have complied with the ESA on its own. The practical consequence is large: a defect buried in one sentence of a termination provision can restore the employee's full common law entitlement to reasonable notice.

Q4: Can I tell on my own whether my termination clause is enforceable?

No reader can confirm enforceability on their own, because the question only runs in one direction. A reader can sometimes spot a likely defect, such as below-ESA language or a claimed right to terminate at any time, but no plain reading can confirm that a clause is enforceable. Ontario courts have invalidated termination clauses on grounds that are numerous, evolving, and often dependent on subtle wording. A clause with no visible problem may still contain a defect that a court would recognise. The absence of an obvious defect is therefore not evidence of validity. Only a legal review of the specific clause, in the context of the whole contract and the current state of the law, can assess how a court is likely to treat it.

Q5: What happens to my severance if the termination clause fails?

A failed termination clause cannot limit the employee's entitlement, so the common law implied term of reasonable notice applies in its place. Under Machtinger, a clause providing less than the ESA minimums is void, and the employee's entitlement reverts to common law reasonable notice, not merely the statutory floor. Courts assess common law notice using the Bardal factors (age, length of service, character of employment, and availability of similar work) and frequently measure it in months. For many employees, the gap between the clause-limited amount and the common law amount is the largest single variable in their severance outcome, often worth months of additional pay, benefits continuation, and bonus entitlements over the notice period.

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