By: Stephanie McDonald and Ravi Bhaduri
What is a Termination Clause?
A termination clause is a provision in an employment contract that specifies the employee’s notice and severance entitlements upon termination.
Most employers will try to limit your entitlements on termination to the minimum notice and severance entitlements outlined by the Ontario Employment Standards Act.
A termination clause usually defines:
- How either party can end the contract
- When the contract can be terminated
- What compensation is owed to the employee upon termination
Why Does It Matter?
Employers routinely point to termination clauses to justify paying less on termination. The problem is that many of these clauses do not hold up legally.
It’s common for employees to be told they are capped at a specific amount because of their contract, only to discover later that the clause is unenforceable and does nothing to limit their termination entitlements.
Why are most termination clauses unenforceable?
In Canada, employers must meet a high bar to establish that their termination clause is valid and enforceable.
Your lawyer will assess whether the clause legally limits your termination entitlements. Many clauses fail because laws change and employers use poorly drafted contracts.
It’s Essential to get Legal Advice
When your employment ends, it’s essential not to accept the first offer without speaking with an employment lawyer.
Your employer may try to tell you the first offer is all you’re entitled to. However, an employment lawyer can tell you whether the first offer is fair, or whether there is room for improvement.
Most initial severance offers have room for improvement, so it’s essential you speak with a lawyer before signing anything. When you sign a full and final release, you permanently give up any further payments from your employer.
We also recommend having an employment lawyer review your agreement before you sign it so that you can understand your rights on termination.
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Learn more about employment law through the articles below:
- Termination of Employment in Ontario: Your Legal Guide for Provincial and Federal Employees
- Ontario Severance Packages: Why You Should Almost Never Accept the First Offer
- How to Read a Severance Package Like a Lawyer
DISCLAIMER: This article/blog is provided for educational/informational purposes only. The views expressed are solely those of the author(s) and should not be attributed to any other party not listed as the author(s).
While reasonable efforts have been made to ensure the accuracy of the content provided, it does not constitute legal advice. Prior to relying on any aspect of this article, you should consult with a suitably qualified legal professional promptly in your relevant jurisdiction, to obtain advice tailored to your individual circumstances
Nothing in this article should be interpreted as forming a solicitor-client relationship or construed as a solicitation for legal services.
