Toronto, ON – July 22, 2026 – Many employers viexw employment agreements as a one-time exercise: prepare a template, have new hires sign it, and store it away. Recent Ontario decisions are a reminder that employment contracts require regular review, particularly where termination provisions and restrictive covenants are concerned.
Termination Clauses
Termination provisions remain one of the most litigated areas of employment law in Ontario. Courts have repeatedly held that language that may breach the Employment Standards Act, 2000 (“ESA“) can render termination provisions unenforceable.
The impact of Waksdale v. Swegon North America Inc. 2020 ONCA 391 continues to be felt, with more than 70 cases on CanLII that have relied on this decision. Courts have consistently applied the principle that an unenforceable for-cause provision can invalidate the entire termination scheme, even where the without-cause language appears valid on its own. Employers should review all termination-related provisions together and ensure older templates comply with current legal requirements.
In Baker v. Van Dolder’s Home Team Inc. 2025 ONSC 952, the Ontario Superior Court found the employer’s termination provisions unenforceable. Among other issues, the contract permitted termination “at any time” and used a just-cause standard that did not properly reflect the ESA’s “wilful misconduct” threshold. A general ESA-compliance statement was not enough to save the clause.
Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, is another reminder that termination clauses must be drafted precisely. The contract contained defects in both the without-cause and for-cause language. The without-cause provision allowed the employer to terminate employment in its “sole discretion” and “at any time,” wording the motion judge found problematic because the ESA restricts termination in certain circumstances, including where employees exercise ESA rights or return from protected leave.
The for-cause clause was also too broad because it suggested employment could end without notice for “cause,” even where the employee’s conduct did not meet the ESA’s higher “wilful misconduct, disobedience or wilful neglect of duty” standard.
Restrictive Covenants
Since October 25, 2021, the ESA has generally prohibited non-competition agreements with employees, subject to limited exceptions for certain C-suite executives and senior officers, and for sellers who become employees of a purchaser following the sale of a business.
Employers should consider whether their interests can instead be protected through a non-solicitation covenant. Unlike a non-compete, a non-solicit does not prevent a former employee from working for a competitor; it focuses on protecting business relationships by restricting solicitation of customers, clients, suppliers, or employees for a defined period.
Non-solicitation covenants are not automatically enforceable. The Supreme Court of Canada’s test in J. G. Collins Insurance Agencies Ltd. v. Elsley, 1974 CanLII 2816 (ON HCJ) asks whether the covenant is reasonable by considering the following factors:
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- The employer has a legitimate proprietary interest, such as client relationships, goodwill, trade connections, confidential information, or trade secrets, that requires protection;
- The restriction is reasonable in duration and limited to what is necessary to protect that interest; and
- The geographic scope is reasonable in the circumstances.
For employers, this means a non-solicitation clause should clearly identify who or what the employee cannot solicit, how long the restriction applies, and the geographic area in which the restriction operates; generally, the shorter the duration and the narrower the geographic scope, the more defensible the clause will be.
Confidentiality and Intellectual Property
Employers should also review their confidentiality and intellectual property clauses. Employees often have access to proprietary information, customer data, pricing strategies, business plans, and confidential processes. Robust confidentiality obligations and clear intellectual property ownership provisions can provide valuable protection without many of the enforceability concerns associated with broad restrictive covenants.
If your organization has not reviewed its employment agreements recently, now is the time. Protea LLP can help assess existing templates, revise termination and restrictive covenant language, and prepare updated agreements that reflect current legal requirements.
