Can a Termination Clause Limit You to Minimum Notice in Ontario?

Can an Employer Limit You to Minimum Statutory Notice in Ontario?

Yes — if a termination clause is drafted to reflect a genuine intention to comply with the applicable employment standards legislation, a court can enforce it and deny any claim for common-law reasonable notice. That is what happened in Henshell v. BFN of Ojibways, 2026 ONSC 5768 (CanLII), where Justice Chiappetta of the Ontario Superior Court upheld a clause limiting a former CEO’s entitlement on termination to the minimums set out in the Canada Labour Code.

The plaintiff left her law practice to become Chief Executive Officer of Batchewana First Nation of Ojibways in May 2024 and was terminated without cause on July 23, 2024. She claimed 24 months’ pay in lieu of notice ($350,000), moral damages, and $500,000 in punitive damages. The employer brought a motion under Rule 21.01 of the Rules of Civil Procedure to decide the enforceability of the termination clause as a question of law and to strike the claim. On that kind of motion, the facts pleaded are assumed to be true.

How Do Ontario Courts Decide Whether a Termination Clause Is Enforceable?

Courts no longer simply scan a contract for problematic words in isolation. Following the Court of Appeal’s recent guidance, the governing question is what the parties objectively intended, read from the contract as a whole and in light of the surrounding circumstances at the time they signed it. The court in this case applied that framework and concluded that both parties — including the employee, an experienced lawyer — would have understood the agreement to require full compliance with statutory minimums on any termination, whether for cause or otherwise. The fact that one section of the contract used language about termination for cause in connection with confidentiality breaches did not override the clear intent expressed in the dedicated termination clause.

This approach moves away from what the court called a “magic words” analysis, where a single phrase could doom an otherwise compliant agreement. Instead, the focus is on the realistic, practical meaning of the contract as a whole.

What Happens When Part of a Contract Seems to Conflict With the Termination Clause?

The court found that an apparent tension between two sections of the same contract does not automatically make the termination clause unenforceable. Where one provision dealt with confidentiality and mentioned termination for cause, and another provision set out the employer’s full termination obligations under the Canada Labour Code, the court read them together. The objective intention that emerged was that any termination — including one triggered by a confidentiality breach — would still have to comply with statutory minimums. A plausible but strained reading of isolated words is not enough to void a clause; the interpretation must reflect what the parties would reasonably have understood.

Can You Still Claim Moral Damages If Your Termination Clause Is Enforceable?

Yes, moral damages remain available even when a termination clause is valid. The court confirmed that moral damages are a separate, compensatory remedy for actual mental distress caused by an employer’s conduct during the dismissal process — they are not simply an add-on to a notice claim. An employer who acts in a way that is untruthful, misleading, or unduly insensitive when letting someone go can still face liability for those damages, regardless of whether the termination clause itself is enforceable.

However, a claim for moral damages must be supported by specific pleaded facts, not just characterizations. In this case, the court found that allegations such as being “unceremoniously” dismissed, being terminated in retaliation for raising financial concerns, or being denied a second opportunity to address a governing council did not — even taken as true — describe conduct that crossed into bad faith in the manner of dismissal. The court drew a clear line between an employer’s reasons for dismissing someone (which are largely unreviewable) and the way the dismissal was carried out (which must meet a duty of honesty and good faith).

What Conduct Has Actually Attracted Moral Damages in Ontario?

For context, the court reviewed conduct that has attracted moral damages in earlier cases, including making unfounded allegations of theft and communicating them to potential employers; assuring an employee her job was not in jeopardy after the decision to terminate had been made while asking others to “dig up dirt” on her; initiating a baseless $1.7 million counterclaim while showing the employee photos of her home; and encouraging an employee to resign rather than be terminated while refusing to reimburse expenses equal to 23% of her salary. These examples share a common thread — active, targeted misconduct directed at the employee during or immediately surrounding the termination itself.

By contrast, the pleaded facts here did not meet that threshold. The court noted the plaintiff did not allege actual misappropriation, did not allege the employer misrepresented its reasons, and did not allege the reason for dismissal was unlawful. There was also no legal right to address Council a second time. The alternative claim that the employer repudiated the contract failed for similar reasons, and the punitive damages claim failed because no independent actionable wrong was pleaded.

Why Was the Claim Dismissed Without Leave to Amend?

Courts generally allow plaintiffs to fix a defective claim by amending it. Here, the court refused that option because the employee had already pleaded the material facts she intended to rely on. The problem was not a drafting gap — it was that the underlying conduct, even accepted as true, did not legally support the claims advanced. Allowing an amendment would only permit a repackaging of the same facts, not the introduction of new ones that could change the outcome.

Questions and Records to Discuss With a Lawyer

• Do you have a copy of your employment agreement, including any termination clause and any policies or procedures it references?
• Were you given any verbal or written assurances about job security or the long-term nature of the role before you signed?
• What specifically happened during the meeting or conversation in which you were told your employment was ending — who was present, what was said, and how were you treated?
• Did the employer make any statements about the reasons for your dismissal, or take any steps after the termination that affected your reputation or future employment prospects?
• Is your employer federally regulated, so that the Canada Labour Code applies, or are you covered by Ontario’s Employment Standards Act, 2000?

If you have questions about a termination clause in your own employment agreement or the circumstances of a dismissal, our Ontario employment lawyers are available to discuss your situation. Whether you are dealing with a wrongful dismissal or want to understand what your employment contract actually means, the specifics of your agreement and the facts of your termination will determine what options may be available to you. Reach out to UL Lawyers through /connect to talk through your circumstances.

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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.