Termination Provisions and Reasonable Notice at Common Law
Put simply, employment agreements are an exchange of promises between employee and employer. These agreements set out the parameters of the parties’ employment relationship and typically contain provisions pertaining to an employees’ entitlements upon the cessation of their employment by way of termination. The enforceability of these provisions as at the date of termination remain a live issue for both contracting parties.
In a nutshell, if the termination provision in an employee’s employment agreement uses language that contravenes the Ontario Employment Standards Act, 2000 (“ESA”) or the case authorities, or if the agreement doesn’t contain a termination provision at all, it is probable that the employee will be entitled to reasonable notice at common law upon termination.[1] This amount is in excess of the employee’s entitlements under the ESA and is presumptively owed to the employee unless they expressly contract out of their right to the same.
If an employment agreement does not contain a termination provision or runs afoul of the ESA, a court would determine the appropriate notice owed to an employee by assessing the factors set out in Bardal v Globe & Mail Ltd[2] (among other relevant factors) which are these: character of employment, age of the employee, years of completed service, and the availability of similar employment. Conversely, if an employee’s employment agreement appropriately limits their entitlements upon termination to that which is set out in the ESA, the employee will have no further entitlements at common law.
It is not unusual for termination provisions to fail for a whole host of reasons specific to the way in which the provision was drafted. However, there are instances where the drafter gets it right, as evidenced by the Ontario Court of Appeal’s holding in Bertsch v Datastealth Inc.[3] [Bertsch].
The Facts of Bertsch
Gavin Bertsch (“Mr. Bertsch”) was a former employee at Datastealth Inc (“Datastealth”). Datastealth terminated Mr. Bertsch’s employment without cause eight and a half months into his tenure. He was paid his minimum ESA entitlements upon the cessation of his employment in accordance with the termination clause in his employment agreement (“Agreement”), which expressly excluded his presumptive right to common law notice. The termination clause read as follows:
Termination of Employment by the Company: If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the Ontario Employment Standards Act, 2000 and its Regulations, as may be amended from time to time (the “ESA”), including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time, you shall instead receive your minimum entitlements owing under the Ontario Employment Standards Act, 2000, as amended from time to time.
On the heels of termination, Mr. Bertsch filed a wrongful dismissal action against Datastealth. He took the position that the termination provision in his employment agreement contravened the ESA because “it failed to reference [Datastealth’s] obligation…to pay termination pay and severance … unless [Mr. Bertsch] engaged in ‘wilful misconduct, disobedience or wilful neglect of duty.’”[4]
Datastealth argued the inverse and moved for a determination by the court that the termination clause in Mr. Bertsch’s Agreement was (1) enforceable; and (2) appropriately restricted his termination entitlements. The court of first instance held that it did. In doing so, the motion judge noted that the termination clause unambiguously limited Mr. Bertsch’s entitlements and could not be interpreted as permitting termination without pay beyond the circumstances authorized by the ESA’s regulations (i.e., wilful misconduct, disobedience and wilful neglect of duty). Mr. Bertsch’s claim was consequently struck.
Mr. Bertsch appealed the motion judge’s ruling and asserted, again, before the Ontario Court of Appeal (“ONCA”) that the termination provision in his Agreement was unenforceable for the foregoing reasons.
The ONCA upheld the lower court’s decision. More specifically, the court refused to accept Mr. Bertsch’s argument and reiterated that the Agreement’s termination clause was unambiguous, did not afoul of the ESA, and appropriately ousted Mr. Bertsch’s presumptive entitlement to reasonable notice at common law.
In coming to this holding, the ONCA considered the legal rule about the variety of interpretations of termination provisions (i.e., that if the same can be interpreted in several ways, it must be interpreted in the way that favours the employee) and the court’s understanding of ambiguity, which is “something more than the mere existence of competing interpretations.” In doing so, the ONCA stated that the focal point of the analysis is on “how the agreement can be reasonably interpreted” and “not whether an ordinary person might arrive at an incorrect interpretation”.
Key Takeaways
For employers, Bertsch offers guidance as to what an enforceable termination provision in Ontario may look like and reminds of the exactness required to appropriately limit an employee’s entitlements upon termination.
Conversely, for employees seeking to preserve their right to common law notice upon termination, Bertsch reminds that (1) it may be prudent to obtain legal advice before executing an employment contract to ensure the foregoing right is preserved; and (2) a lack of compliance with the ESA in the drafting of an employment agreement may result in an employee being entitled to further entitlements upon termination.
Written by: Shadé Edwards
[1] See generally Stevens v Sifton Properties ltd., 2012 ONSC 5508 (CanLII).
[2] (1960) 24 DLR (2d) 140.
[3] 2025 ONCA 379 (CanLII)
[4] Bertsch v. Datastealth Inc., 2024 ONSC 5593 (CanLII) at para 8.