In Dufault v Ignace (Township), 2024 ONCA 915, the Ontario Court of Appeal found the “for cause” termination clause in the contract was illegal and unenforceable, because it undermined the Ontario Employment Standards Act’s (ESA) employee protections. The ESA only allows an employer to terminate without notice for the most serious employee misconduct (i.e. “wilful misconduct” or wilful neglect). By contrast, the contract defined “cause” much more broadly – for example, it treated an employee’s failure to adequately perform their duties as cause for immediate dismissal. This expanded definition went beyond the ESA’s narrow exception and thus contracted out of the minimum standards, which the law prohibits. The Court agreed with the lower judge that this clause was void for non-compliance with the ESA’s requirements.
Because the “for cause” provision was invalid, the employer argued the court should sever (remove) that clause and still enforce the separate “without cause” termination clause. The Court reasoned that an employment contract’s termination provisions must be read as a whole, meaning if any part of the termination clause violates the statutory minimums, then no part of that clause is enforceable. Given its conclusion that the “for cause” portion was void, the Court ruled that the entire termination clause (both the for-cause and without-cause portions) fails in its entirety. In other words, it was unnecessary to separately analyze whether the “without cause” provision met ESA standards, because the invalid for-cause clause already invalidated all termination clauses in the contract by operation of law.
Outcome Of The Appeal
The Ontario Court of Appeal dismissed the employer’s appeal, upholding the decision of the Superior Court. The termination clauses in the contract were confirmed to be unenforceable for contravening the ESA’s minimum standards, and the employee was therefore considered wrongfully dismissed. Since the contract in question was for a fixed term, the employee was entitled to be made whole for the balance of that term. The Court of Appeal affirmed that the employee should receive full damages as if the contract had run its course (in this case, pay for the remaining term), given that the contractual termination limitation was void.
In sum, the key principles from this decision are that overbroad termination clauses will not be upheld, and an employer cannot save an otherwise unlawful termination clause by severing the offending parts – the entire clause will be struck down, leaving the employee with their full entitlements on dismissal.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018 and Evolution Legal in 2026.