Case snapshot
At a glance
- Case
- Can a Flawed 'For Cause' Clause Void Your Whole Termination Clause in Ontario?
- Court / Tribunal
- Court of Appeal for Ontario
- Citation
- 2026 ONCA 766 ↗
- Date
- October 29, 2026
- Area of law
- Employment Law
- Key issue
- Whether a termination clause that defines 'for cause' more broadly than the Canada Labour Code's 'just cause' standard is unenforceable, and whether that unenforceability voids the entire termination provision.
- Outcome
- The Court of Appeal dismissed the employer's appeal with costs of $25,000 all-inclusive, upholding the trial judge's finding that the entire termination clause was unenforceable and that the employees were entitled to common law reasonable notice, including variable incentive pay and annual bonus amounts.
- Why it matters
- If your employment contract contains a termination clause with a flawed 'for cause' definition, the entire clause — not just the bad part — may be thrown out, which can mean common law reasonable notice instead of the contract's formula.
Legal principle
The rule from this case
Under the Canada Labour Code, an employer cannot dismiss an employee without notice or severance unless it has 'just cause.' When a termination clause defines 'for cause' in a way that is broader than that statutory standard — effectively letting the employer withhold notice or severance in situations the Code would not permit — the clause breaches minimum employment standards. A clause that purports to deny an employee 'notice, severance, or other damages whatsoever' on a lower threshold than the Code allows is not compliant with the law. Once any part of a termination provision fails to meet minimum standards, courts read the termination provisions as a whole rather than severing the offending part. Following the logic of Waksdale v. Swegon North America Inc., the Court confirmed that this approach applies under the Canada Labour Code just as it does under Ontario's Employment Standards Act. The Court agreed with the trial judge that the contract's 'Compliance with Legislation' provision did not make the clause compliant, citing Rossman v. Canadian Solar Inc., 2019 ONCA 992. The employees were therefore entitled to common law reasonable notice instead of the contract's formula.
Important limits
What this does not mean
This decision does not mean that every termination clause is automatically unenforceable. A carefully drafted clause that accurately tracks the statutory 'just cause' standard — and does not purport to strip away rights the Code guarantees — can still be valid and binding. The ruling is specifically about clauses that set a lower bar for withholding notice or severance than the law permits. The case also does not stand for the proposition that employees can simply refuse any alternative work offered after dismissal and still recover full damages. The Court confirmed that the employer bears the burden of proving an employee acted unreasonably in declining alternative positions, and that the positions offered must be genuinely comparable to the original role. On the facts here, the trial judge found the offered positions were not comparable, and the Court of Appeal found no basis to disturb that finding — it was not a blanket rejection of the mitigation principle.
What Happens When a ‘For Cause’ Clause in Your Employment Contract Is Too Broad?
When a termination clause defines ‘for cause’ more broadly than the law allows, the entire termination clause can be thrown out — not just the offending definition. That is the practical result of the Court of Appeal’s decision in Ghazvini v. Canadian Imperial Bank of Commerce, 2026 ONCA 766 (CanLII), available on CanLII. For employees covered by the Canada Labour Code, this ruling clarifies that the same analytical framework used in Ontario’s provincial employment law applies federally. The Court dismissed the appeal. The respondents are entitled to costs of $25,000, all inclusive.
What Does the Canada Labour Code Require for a ‘For Cause’ Dismissal?
The Canada Labour Code sets a specific standard: an employer must have ‘just cause’ to dismiss an employee without notice or severance. The termination clause at issue in this case used a broader definition of ‘for cause’ — one that would allow the employer to deny the employee notice, severance, or any other damages in situations that would not actually qualify as ‘just cause’ under the Code. The Court found that this mismatch meant the clause failed to meet the minimum standards the Code requires.
The Court distinguished this clause from the one in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568. There, a similarly overly inclusive for-cause provision was still compliant because an employee terminated for cause remained entitled to the minimum compensation or entitlements prescribed by the Employment Standards Act. There is no such language in the CIBC clause.
This matters because federally regulated employees — those working in banking, telecommunications, interprovincial transportation, and similar industries — are protected by the Canada Labour Code rather than Ontario’s Employment Standards Act. This decision confirms that the same vigilance about ‘for cause’ definitions applies in both regimes.
Does a Bad ‘For Cause’ Clause Void the Entire Termination Provision?
Yes — when a termination clause contains a provision that breaches minimum employment standards, courts read the termination provisions as a whole and will not simply remove the offending part. The Court applied the same approach established in Waksdale v. Swegon North America Inc. and confirmed it governs under the Canada Labour Code as well. The employer cannot ask a court to sever the non-compliant portion and enforce the rest.
The Court of Appeal agreed with the trial judge that the contract’s “Compliance with Legislation” provision did not make the clause compliant with the Canada Labour Code, citing Rossman v. Canadian Solar Inc., 2019 ONCA 992.
What Notice Is an Employee Owed When the Termination Clause Is Unenforceable?
When a termination clause is unenforceable, the employee is entitled to common law reasonable notice — the amount a court determines is fair based on factors such as the employee’s age, length of service, the character of their position, and the availability of comparable employment. Common law notice is often more generous than the minimum amounts set out in legislation or a contractual formula, which is why the enforceability of termination clauses matters so much in practice.
Our Ontario employment lawyers regularly advise employees on whether the termination clause in their contract is enforceable and what they may be owed if it is not.
Does Variable Pay and Bonus Count Toward Wrongful Dismissal Damages?
The Court upheld the trial judge’s decision to include variable incentive pay and an annual bonus in the damages calculation. Following the Supreme Court of Canada’s guidance in Matthews v. Ocean Nutrition Canada Ltd., the Court confirmed that an employer must use clear and unambiguous language to exclude incentive pay or bonus from a damages calculation during the notice period. The plan in this case did not do so clearly enough, and the damages award was upheld.
This is a significant point for employees whose compensation includes performance bonuses, commissions, or other variable elements. If the plan documents do not unambiguously exclude those amounts during the notice period, they may form part of what you are owed.
What Happens If You Turn Down a Job Offer After Being Dismissed?
Dismissed employees have a legal obligation to take reasonable steps to find new work — this is called the duty to mitigate. However, the burden of proving that an employee failed to mitigate falls on the employer, not the employee. In this case, the employer argued that the employees should have accepted alternative positions that were offered. The trial judge found those positions were not genuinely comparable to the employees’ original roles, and the Court of Appeal found no reason to interfere with that finding.
This does not mean employees can refuse any offer without consequence. It means the employer must show both that a comparable opportunity was available and that the employee’s refusal was unreasonable in the circumstances. If you are navigating this question after a dismissal, speaking with a lawyer about your specific situation is important — our wrongful dismissal team can help you understand where you stand.
Questions and Records to Discuss with a Lawyer
- Does your employment contract contain a termination clause, and how does it define ‘for cause’ or ‘just cause’?
- Are you covered by the Canada Labour Code (federally regulated) or Ontario’s Employment Standards Act (provincially regulated)?
- Does your compensation include variable pay, bonuses, or commissions, and what do your plan documents say about those amounts during a notice period?
- If you were offered alternative work after dismissal, how did that position compare to your original role in terms of title, pay, responsibilities, and reporting structure?
- What records do you have of your employment history, compensation structure, and the circumstances of your dismissal?
If you have questions about a termination clause or a recent dismissal, the team at UL Lawyers is available to discuss your circumstances — reach out through /connect.
This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.
FAQ
Frequently asked questions
Under the approach confirmed by Ontario courts, termination provisions are read as a whole. If any part of the clause breaches minimum employment standards, courts will generally refuse to enforce the entire termination provision rather than severing the bad part and keeping the rest.
Yes. The Court of Appeal confirmed in this 2026 decision that the analytical framework from Waksdale v. Swegon — which requires termination provisions to be read as a whole — applies under the Canada Labour Code, not just under Ontario's Employment Standards Act.
Bonuses and variable pay can be included in wrongful dismissal damages if the plan documents do not clearly and unambiguously exclude them during the notice period. Courts look closely at the specific language of the plan before deciding whether those amounts are owed.