Insights/Bulletins/2025

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Key Considerations in Termination Packages: Navigating Risk for Employers and Employees

May 14, 2025

Authored by : Employment Legal Team VK Law Group

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This bulletin outlines key legal considerations for both employers and employees when negotiating or offering termination packages in Ontario, with a view to managing risks and ensuring compliance with statutory and common law obligations.

Statutory Entitlements under the ESA

 

Under Ontario’s Employment Standards Act, 2000 (ESA), employees may be entitled to termination pay, severance pay, and notice of termination, subject to prescribed eligibility requirements and exemptions.

• Termination Pay: Most employees with at least three months of service are entitled to either notice of termination or pay in lieu thereof.

• Severance Pay: Employees with five or more years of service may be entitled to severance pay if the employer has a payroll of $2.5 million or more or the termination results from the permanent discontinuance of all or part of the business affecting 50 or more employees.

 

Employers must calculate minimum ESA entitlements before proposing a termination package.

 

Common Law Reasonable Notice

In addition to ESA minimums, employees may be entitled to common law reasonable notice, unless a valid employment contract limits such entitlements. Courts assess reasonable notice using factors from Bardal v. Globe & Mail Ltd., including:

• Length of service

• Age of the employee

• Character of the position

• Availability of similar employment

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Employers should evaluate exposure to common law damages when preparing termination packages.

Waivers and Full and Final Releases

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To minimize litigation risk, employers typically require employees to execute a Release in exchange for enhanced payments beyond ESA minimums. Key considerations include:

• Releases must be clear, unequivocal, and freely entered into.

• Courts may invalidate a Release where there is duress, unconscionability, or lack of independent legal advice.

• Employers should avoid overbroad or ambiguous language that could result in unenforceability.

Group Terminations and Notice Requirements

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For terminations of 50 or more employees at an employer’s establishment within a 4-week period, group termination provisions under the ESA are triggered, requiring:

• Advance notice to the Ministry of Labour

• ESA-prescribed group notice periods

• Posting of a Form 1 Notic

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Failure to comply can result in statutory and regulatory penalties.

 

Key Takeaways for Employers and Employees

• Employers: Assess both ESA and common law entitlements, document the rationale behind termination decisions, and offer additional consideration for enforceable Releases.

• Employees: Obtain legal advice before signing any documents, especially where common law entitlements are being waive

 

For Further Information

For a comprehensive analysis of your obligations or entitlements under Ontario employment law, contact a member of our Employment & Labour team.

 

Insights/Bulletins/2025

 

Human Rights in the Workplace: Employer Duties and Employee Protections

April 14, 2025

Authored by : Employment Legal Team VK Law Group

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This bulletin summarizes employers’ obligations and employee protections under the Ontario Human Rights Code (the “Code”), with an emphasis on discrimination, accommodation, and procedural compliance in employment settings.

 

Protected Grounds and Prohibited Conduct

The Code prohibits discrimination in employment based on 16 protected grounds, including race, disability, age, gender identity, family status, and creed. Employers must ensure that:

• Hiring, promotion, and termination decisions are free from direct or systemic discrimination

• Job advertisements and descriptions are neutral and inclusive

• Workplace environments are free from harassment

 

Duty to Accommodate

Employers have a positive obligation to accommodate employees to the point of undue hardship. This includes accommodations for:

• Disabilities (including mental health and addiction)

• Religious observances

• Family obligations related to caregiving

Employers must engage in a meaningful, individualized assessment of accommodation requests, supported by medical or other relevant documentation.

 

Undue Hardship Threshold

The threshold for undue hardship is high. Only cost, outside sources of funding, and health and safety may be considered. Employers must:

• Document efforts and rationale for denying accommodation

• Demonstrate that all reasonable alternatives were explored

Failure to accommodate appropriately can result in damages before the Human Rights Tribunal of Ontario.

 

Complaint Process and Employer Liability

Employees may file complaints with the Human Rights Tribunal of Ontario. Employers may be held vicariously liable for the conduct of supervisors, managers, and even co-workers unless:

• Prompt and effective corrective action is taken

• Anti-discrimination and harassment policies are implemented and enforced

• Training is provided on rights and responsibilities under the Code

 

Best Practices for Employers

• Maintain and update human rights policies and complaint procedures

• Provide regular training on human rights obligations

• Document all complaints and accommodation efforts

 

For Further Information

Our Employment & Labour team is available to assist with human rights compliance, policy drafting, and defending claims before the Tribunal.

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Insights/Bulletins/2025

Best Practices for Drafting Employment Contracts in Ontario

March 14, 2025

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This bulletin outlines recommended practices for drafting enforceable employment contracts in Ontario, following evolving case law and legislative developments.

 

Enforceability of Termination Clauses

Ontario courts have routinely struck down termination clauses that fail to comply with ESA minimums.

 

Drafting considerations include:

• Avoid language that purports to contract out of ESA rights

• Ensure termination for cause aligns with the ESA definition (willful misconduct, disobedience, or neglect of duty)

• Use savings clauses cautiously—courts may disregard them if the termination clause is otherwise void

 

Timing and Consideration

Contracts must be signed before the start of employment. Otherwise, fresh consideration (e.g., bonus, promotion) is required to enforce later-signed agreements.

• Offer letters and contracts should be dated and executed in advance

• Avoid retrospective amendments unless supported by new consideration

 

Restrictive Covenants

Non-competition clauses are largely unenforceable unless the employee is an executive. Consider:

• Using narrowly tailored non-solicitation clauses instead

• Ensuring duration and geographic scope are reasonable

• Identifying specific client lists or proprietary information covered by the restriction

 

Key Clauses to Include

Employment contracts should address the following:

• Job title and duties

• Compensation, benefits, and bonus structure

• Probationary period

• Termination rights (with compliance to ESA and common law)

• Intellectual property ownership and confidentiality obligations

• Dispute resolution mechanisms (optional)

 

Annual Review and Legislative Updates

Given evolving jurisprudence employment contracts should be reviewed annually to:

• Ensure continued enforceability

• Reflect changes in roles, compensation, or location

• Respond to legislative amendments, such as those arising from the Working for Workers Acts

 

For Further Information

To ensure your employment contracts are enforceable and protective of your organization’s interests, contact our Employment & Labour team for a tailored review.

 

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Practices

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Employment & Labour

 

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