Where Are We Now? Contractual Termination Provisions Five Years Post-Waksdale.

What is the state of the law of Ontario on termination clauses as of Labour Day 2025?

To say that the Ontario courts’ approach to contractual termination clauses has been a bit of a whirlwind over the last five years might be an understatement. Let’s recall that Waksdale, now nearly as ubiquitous as Bardal or Machtinger, was only released in August of 2020.

That is why I am grateful for Justice Ira G. Parghi’s reasons for decision in Chan v. NYX Capital Corp., 2025 ONSC 4561 (CanLII). Justice Parghi’s reasons provide a textbook summary of the state of the law on termination clauses in Ontario, which I summarize in this post.

When a Mistake Becomes Repudiation: The Risk of Conditioning Termination Pay

An employer’s mistake as to its legal obligations can invalidate a contractual termination provision.

In Perretta v. Rand A Technology Corporation, 2021 ONSC 2111 (CanLII), Justice Andrew A. Sanfilippo held that an employer’s refusal to pay its former employee the two weeks to which she was contractually entitled—unless she first signed a full and final release, constituted a repudiation of the employment contract, thereby entitling her to common-law damages.

Repudiation by Allegation: The Risk of Falsely Alleging Cause

A knowingly false allegation of “cause” can void an otherwise valid termination provision.

In Dixon v British Columbia Transit, [1995] BCJ No 1892 (BC SC), the British Columbia Supreme Court held that an employer could not rely on its contractual termination provision to limit its severance obligation because the contract did not provide for a measure of liquidated damages in the event of wrongful dismissal; the contract only provided for compensation in lieu of notice if dismissal was pursuant to the employer's lawful right to dismiss in the absence of cause.

Employers Cannot Rescind Notices of Termination

Can an employer withdraw a termination of employment after it has been delivered to its employee?

In a series of cases from the Ontario Superior Court of Justice, one of which I argued, judges have consistently held that an employer cannot.

Employers May Deduct Statutory Payments from Wrongful Dismissal Damages

When calculating damages for failing to provide reasonable notice of termination, can an employer deduct statutory termination pay and severance already paid to the employee?

The 1996 decision of the Court of Appeal for Ontario in Stevens v. The Globe and Mail, 1996 CanLII 10215 (ON CA), affirmed that the employer is entitled to make such deductions.