Caution to Employers. When it comes to Employment Contracts: One Word Can Make All the Difference — Precision Matters Even When the Intention Seems Clear

In yet another cautionary decision from the Ontario Court of Appeal, employers are reminded that when it comes to employment contracts, the actual wording—not the employer’s intention—governs. The Court upheld a lower court ruling that struck down a termination clause for non-compliance with the Employment Standards Act, 2000 (ESA), resulting in the employee being awarded common law notice.

Case Overview

Ellen De Castro worked at Arista Homes for nearly five years before being dismissed without cause. Her employer relied on the termination clause in her employment contract, which promised ESA minimum entitlements—four weeks’ salary in her case.

However, Ms. De Castro argued—drawing on the precedent set in Waksdale v. Swegon North America Inc.—that because the for-cause termination clause violated the ESA, the entire termination provision was unenforceable. The trial judge agreed and awarded her eight months’ salary in lieu of notice. Arista Homes appealed.

The Key Issue

The central question on appeal was whether the for-cause termination clause violated the ESA. If it did, the entire termination provision—both for-cause and without-cause—would be invalid.

The Court’s Analysis

The Court closely examined the language of the for-cause clause, focusing on two key elements:

• The use of “or” in the clause separated different types of misconduct, some of which fell outside the narrow definition of “wilful misconduct” permitted by the ESA.

• The clause also defined cause as “shall include” certain acts. The Court found this language non-exhaustive, implying that termination could occur for reasons beyond what the ESA permits.

  
  

Ultimately, the Court agreed that the clause allowed for termination without notice in scenarios not permitted under the ESA, rendering it unenforceable. The employer’s intent to comply was irrelevant—the clause failed based on its actual language.

Lessons for Employers

This case reinforces a critical rule: Courts will strike down termination clauses that do not strictly comply with the ESA, even if the employer did not intend to violate the law.

Key takeaways:

• Every part of a termination clause must align with the ESA.

• Poor or imprecise drafting—even in one portion of a contract—can invalidate the entire termination provision.

• Employers should regularly review and update their employment contracts to ensure compliance with current employment standards and case law.

  
  

Bottom line: In employment law, one word really can make all the difference. A well-intentioned but poorly worded contract can lead to costly consequences. As a former Labour and Employment lawyer turned Human Resources Consultant, I help employers take a proactive, legally-sound approach to managing workplace risk. I work closely with businesses to draft, review, and update employment contracts and HR policies that are compliant, clear, and strategically aligned with their operational goals.

If you’re unsure whether your employment contracts would stand up to legal scrutiny—let’s talk. A few words now can save you from costly disputes later.