For many Ontario employers, employment contracts feel like a box you checked years ago. You used a reputable template. It references the Employment Standards Act (the “ESA”). It’s been signed. There’s no liability there… right?  

Not quite.  

This assumption is becoming the most expensive employee-related risk employers face today. 

Ontario courts continue to take a hard look at termination clauses, and the message is clear: saying your contract is “ESA‑compliant” doesn’t automatically protect you when an employment relationship ends. 

Why This Matters More Than Ever 

Termination clauses exist to create certainty. They’re meant to help employers understand their financial exposure and avoid surprise claims after a termination. However, courts have been striking down termination clauses for reasons that often surprise business owners:  

• Wording that’s too broad;  

• Assertions that limit an employee’s rights;  

• Language that may sound ‘reasonable’ but goes too far; or 

• Clauses that don’t line up with how the ESA works in practice.  

When a termination clause is found unenforceable, the result isn’t a small technical issue. It likely means the employee has a claim of common‐law reasonable notice, which can be months, or even years of pay above the ESA minimums.

The Trap: “ESA‑Compliant” on Paper, Risky in Reality 

Many employers believe that as long as a contract references the ESA, they’re protected. Unfortunately, courts don’t look at intention, but rather possibility.  

If a termination clause could be interpreted as allowing something the ESA prohibits, even if you would never do it in real life, or even if the situation is not applicable to the current facts of the termination you’re contemplating, the clause may fail entirely. 

Common faulty termination clauses include language that: 

• suggests an employee can be terminated “at any time”; 

• uses broad “for cause” wording that doesn’t match the ESA’s strict standard; or 

• relies on general “savings” language to fix otherwise problematic clauses. 

From a business perspective, this is frustrating. From a legal perspective, it’s now very predictable. 

Why Small and Mid‑Sized Businesses Are Especially Exposed 

Larger organizations often review and refresh contracts regularly. Many small and mid‑sized businesses don’t. Not because they don’t care, but because of practical realities: nothing has gone wrong (yet), the contract “worked fine” last time, and decisions to terminate are often made under time pressure. Unfortunately, the risk usually shows up after a termination, when the relationship is already strained, and legal costs are harder to control. 

What Smart Employers Are Doing Now 

The businesses best positioned in 2026 aren’t panicking.  

They are: 

• Reviewing employment agreements, and particularly termination clauses, before a termination is even on the table; 

• Removing language that creates unnecessary risk; and 

• Treating employment contracts as living risk‑management tools, not static templates. 

The Takeaway 

In today’s Ontario employment law climate, “ESA‑compliant” is the starting point, not the finish line. 

If your contracts haven’t been reviewed in the last few years, or if they were built from templates designed for a different legal moment, 2026 is definitely the right time to take a closer look. A small investment in clarity now can prevent a much larger problem later. 

The SpringLaw team works with growing Ontario businesses to keep employment agreements current, practical, and aligned with today’s legal landscape.  If you’re unsure whether your templates still work for 2026, we’re happy to help. CONTACT US