For employers, an outdated employment contract is not just a technical oversight: it is a financial liability waiting to happen. In employment law, the legal landscape is constantly changing; even a single flaw or an outdated clause in employment contracts can turn a manageable termination into an expensive payout.

Employment contracts are only as strong as their most recent review. Laws evolve, courts re-interpret clauses, and what was enforceable last year may be useless in court today. A proactive review protects the business from unexpected costs and lengthy litigation.

The Law Will Not Stand Still — Neither Should Employment Contracts

No termination clause is evergreen. The law is constantly changing, and when a termination clause is found to breach the Ontario Employment Standards Act, 2000 (“ESA”), the result is simple: it is unenforceable. That means the employee receives common law reasonable notice, which is often at least four times the statutory minimum under the ESA.

The 2019 decision in Waksdale invalidated almost all employment contracts by holding that a flaw in part of the termination provision invalidates the entire termination section. In 2024, Dufault made more clauses unenforceable by rejecting language such as “at its sole discretion” and “at any time” as inconsistent with the ESA.

Even punctuation can be costly. This year, a Nova Scotia court struck down a termination clause because of a missing comma and problematic reference to severance pay.

If employment contracts have not been reviewed in years, there is a real risk they contain similar flaws.

Courts Seem to Be Awarding Longer Notice Periods, and It Is Costing Employers

Recent cases show courts granting longer reasonable notice than many employers expect. Employers should regularly review their employment contracts to ensure they are under proper contractual protection.

It is much easier for executives to get longer notice periods, which results in significantly higher severance packages due to their higher salaries. In a recent case, a Vice-President with only 4 years of service was awarded 12 months’ notice. In another case, also in 2025, an executive with only 7 months of service was awarded 14 months because the court found he had been induced to leave secure employment.

Courts have established 24 months as the “rough upper limit” for reasonable notice, which can only be exceeded in “exceptional circumstances.” Now it seems that it is easier for employees to establish “exceptional circumstances” than before. In recent years, courts have awarded employees more than 24 months where “exceptional circumstances” exist, including:

• A lifetime career with a single employer, combined with age and seniority at termination (26 months, a 2016 case).
• Termination effectively amounted to forced retirement, where age, non-transferable skills, and education limited job prospects (26 months, a 2022 case).
• Extremely long service with one employer, leading to concerns about adaptability in a new workplace (27 months, a 2022 case).
• Highly specialized skills tied exclusively to the employer’s operations, limiting re-employment opportunities (30 months, a 2023 case).

For employers, this means that once a termination clause fails, the potential payout could be far greater than expected.

What Does This Mean for Employers?

Relying on contracts drafted years ago is risky. Termination clauses may be out of date, and courts are leaning toward awarding longer notice periods than ever before.

Review employment contracts regularly, ideally every year, with experienced legal guidance. A relatively small investment in annual reviews can prevent a much larger expense of litigation or inflated termination payouts.