Law360 Canada (June 18, 2026, 10:31 AM EDT) --

Tega Adjara

Canadian employment law has long attempted to balance two competing objectives. On one hand lies the protection of employees, who are generally regarded as the more vulnerable party in the employment relationship. On the other lies the principle of contractual certainty, which permits employers and employees to define their rights and obligations through freely negotiated agreements.

Recent judicial decisions suggest that this balance may be shifting. Courts across Canada appear increasingly divided on how strictly termination clauses should be scrutinized. While some decisions continue to favour robust employee protection, others signal a growing willingness to uphold employment contracts where the parties have clearly expressed their intentions. The result is an emerging judicial divide that has created uncertainty for employers, employees and legal practitioners alike.

The debate is perhaps best understood through four recent decisions: Waksdale v. Swegon North America Inc., Dufault v. The Corporation of the Township of Ignace, Egan v. Harbour Air Seaplanes LLP, and Bertsch v. Datastealth Inc.

The legacy of Waksdale

The modern debate began in earnest with the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391.

Benjamin Waksdale’s employment agreement contained separate provisions addressing termination with cause and termination without cause. While the without cause provision complied with the minimum requirements of Ontario’s Employment Standards Act, 2000, the for cause provision did not. The employer argued that the invalid for cause clause was irrelevant because Waksdale had been terminated without cause.

The court rejected that argument. It held that termination provisions must be read as a whole. If one portion of the termination regime violates employment standards legislation, the entire termination scheme may be unenforceable.

The decision sent shock waves through the employment law community. Employers who believed they had carefully drafted enforceable termination clauses suddenly found themselves exposed to common law reasonable notice claims because of technical defects elsewhere in the agreement.

Supporters of the decision viewed it as an important safeguard against contractual overreach. Critics argued that it elevated form over substance and created a level of uncertainty inconsistent with commercial reality.

Regardless of one’s perspective, Waksdale fundamentally altered the landscape of employment contract litigation in Ontario.

Dufault and the expansion of judicial scrutiny

The employee protection trend gained further momentum in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, affirmed by the Ontario Court of Appeal in 2024.

The termination clause at issue permitted the employer to dismiss the employee “at any time.” Although this language may appear innocuous at first glance, the court found it problematic because it purported to grant broader termination rights than those permitted under the Employment Standards Act.

The court concluded that the wording potentially allowed termination in circumstances prohibited by legislation, including situations where statutory protections might otherwise apply. As a result, the clause was held unenforceable.

The significance of Dufault extends beyond its specific facts. The decision demonstrates the increasingly rigorous approach some courts have adopted when reviewing employment contracts. Rather than focusing solely on what the employer actually did, courts are examining what the contract theoretically permits an employer to do.

This approach reflects a strong commitment to employee protection. However, it also creates challenges for employers attempting to draft enforceable agreements. Language that might once have been regarded as routine can now render an entire termination provision invalid.

A different perspective from British Columbia

While Ontario courts have continued to expand scrutiny of termination clauses, British Columbia has shown signs of adopting a more balanced approach.

In Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222, the British Columbia Court of Appeal considered whether a termination provision should be invalidated based on hypothetical violations that had never occurred.

The court declined to embrace an overly technical analysis. Instead, it emphasized the importance of interpreting employment agreements reasonably and contextually.

The decision suggested that courts should focus on the actual legal effect of the clause rather than on speculative possibilities that may never arise in practice.

Although Egan does not represent a complete departure from employee protection principles, it reflects a judicial philosophy that places greater weight on contractual certainty. Employers require predictability when drafting agreements, and parties should generally be able to rely upon the language they have chosen unless it clearly violates statutory requirements.

The contrast between Ontario and British Columbia is becoming increasingly difficult to ignore. While Ontario courts have demonstrated a willingness to invalidate clauses based on potential statutory breaches, British Columbia appears more reluctant to set aside agreements absent a clear and substantive violation.

Bertsch and a potential turning point

The most significant recent development may be found in Bertsch v. Datastealth Inc., 2025 ONCA 379.

In Bertsch, the Ontario Court of Appeal appeared to signal a more measured approach to termination clause interpretation. While the court did not overturn Waksdale, it cautioned against strained and unrealistic interpretations of contractual language.

The decision recognized that employment agreements should be interpreted as a whole and in accordance with ordinary principles of contractual interpretation. Courts should not search for theoretical defects where none genuinely exist.

For many observers, Bertsch represents a possible recalibration of Ontario employment law. The decision acknowledges the importance of protecting employees while also recognizing that employers require a degree of certainty when drafting contracts.

Whether Bertsch marks the beginning of a broader judicial shift remains to be seen. Nevertheless, it has been welcomed by many employers and employment lawyers who have expressed concern about the increasing unpredictability of termination clause litigation.

The growing divide

Taken together, these decisions reveal a growing philosophical divide within Canadian employment law.

One approach prioritizes employee protection. Under this view, employment contracts must be subjected to rigorous scrutiny because employees often possess less bargaining power than employers. Any ambiguity or potential inconsistency with employment standards legislation should be resolved in favour of employees.

The competing approach emphasizes contractual certainty. Proponents argue that employers and employees benefit when agreements are predictable and enforceable. Excessive scrutiny can undermine commercial stability and encourage litigation over technical drafting issues that have little practical significance.

Both perspectives have merit.

Employment standards legislation exists precisely because employees are often vulnerable to unequal bargaining power. Courts therefore play an important role in ensuring that employers do not contract out of minimum statutory protections.

At the same time, employers require clear rules. If even carefully drafted agreements are vulnerable to invalidation based on increasingly technical interpretations, the result may be greater uncertainty for everyone involved.

Looking ahead

The emerging divide between employee protection and contractual certainty is likely to shape Canadian employment law for years to come.

Employers should continue reviewing their employment agreements regularly and ensure that termination provisions comply not only with statutory requirements but also with evolving judicial interpretations. Reliance on older contractual templates may create significant liability.

Employees and their counsel should remain alert to potential deficiencies in termination provisions, particularly where contractual notice seeks to limit common law entitlements.

Ultimately, the Supreme Court of Canada may be required to provide guidance on the appropriate balance between protecting employees and preserving contractual certainty. Until then, employment lawyers across the country will continue navigating a legal landscape marked by increasing complexity and divergent judicial approaches.

The struggle between employee protection and contractual certainty is not new. What is new is the growing willingness of Canadian courts to confront that tension openly. The outcome of that debate will help define the future of employment law in Canada.

After completing his LLB at the University of East London, Tega Adjara pursued a specialized LLM in international law and the global economy. Currently, he is working for the Alberta government sentencing department.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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