Case information

Employment law — Contract of employment — Termination clauses — Compliance of termination clauses with Ontario’s employment standards legislation — To what extent is the principle set out in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, still applicable? — Does an employer have the discretion to terminate an employment contract without cause provided adequate notice or payment in lieu are given? — Can the wording of a “for cause” termination clause be relied upon to invalidate a separate and distinct “without cause” termination clause? — To what extent, if any, can employers and employees use and rely on severability clauses in their agreements? — Employment Standards Act, 2000, S.O. 2000, c. 41, s. 55 — Termination and Severance of Employment, O. Reg. 288/01, s. 2(1)3.

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The respondent, Karen Dufault, was employed by the applicant, Corporation of the Township of Ignace, on a fixed-term contract ending on December 31, 2024. However, on January 26, 2023, the respondent’s employment was terminated effective immediately on a without cause basis. The respondent filed a summary judgment motion for wrongful dismissal and damages. She claimed that the termination clauses in her employment contract were illegal and unenforceable. The motion judge found that the termination clauses failed to comply with the minimum standards set out in the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), and were unenforceable. She thus granted the summary judgment motion and ordered the applicant to pay the respondent $157,071.57 in damages for wrongful dismissal. The applicant appealed the motion judge’s order. The Court of Appeal for Ontario agreed with the motion judge that the “for cause” termination clause failed to meet the minimum standards provided for in the ESA. The court found that the “without cause” termination clause was also invalid pursuant to Waksdale v. Swegon North America Inc., 2020 ONCA 391, which holds that if one termination provision in an employment contract violates the ESA minimum standards, then all termination provisions in the contract are invalid. Since the Court of Appeal determined that both termination clauses were unenforceable, it concluded that the motion judge was correct in finding that the respondent was entitled to damages based on the end date of the fixed term employment contract, and dismissed the appeal.