The Dufault case is yet another warning to employers that ESA compliance is not optional. Minor deviations in a termination clause can make the entire clause void, exposing the employer to significant liability.
In a decision with major implications for public- and private-sector employers alike, the Supreme Court of Canada has declined to hear the Township of Ignace’s appeal in Dufault v. Ignace (Township). This effectively affirms lower court rulings that found the Township wrongfully dismissed employee Karen Dufault and must pay more than $157,000 in damages, a decision grounded in the well-established principle that termination clauses must strictly comply with the Employment Standards Act, 2000 (ESA).
The Supreme Court of Canada’s dismissal on June 6, 2025, marks the end of the legal road for the municipality. It also sends a strong signal to employers: contracts with illegal or ambiguous termination language will not withstand judicial scrutiny.
Background: A Flawed Termination Clause
Dufault was employed by the Township of Ignace as a youth engagement coordinator under a fixed-term contract. She was terminated without cause just shy of completing one year of a three-year term. Despite this, the Township offered only two weeks’ pay as severance.
Dufault challenged the legality of the termination clause in her contract, arguing it violated the ESA and was therefore unenforceable. The Ontario Superior Court of Justice agreed, awarding her 101 weeks’ pay in damages to reflect the remainder of her contract, for these reasons:
1. The termination clause permitted the employer to terminate the employee’s employment “for cause”, without notice. However, the Court held that the language “for cause” did not meet the standard of cause under the ESA or its regulations which would permit the Employer to not pay an employee their ESA The Court held that the language “for cause” amounted to cause under common law, and by withholding ESA notice for a “for cause” termination would result in a breach of the ESA. The Court also found that the examples of “for cause” listed in the termination clause did not rise to the level of “wilful misconduct, disobedience or wilful neglect of duty” as defined by the ESA Regulation 288/01, therefore once again breaching the ESA.
2. The termination clause also contained a “without cause” clause which stated that ESA notice would be paid on the basis of the employee’s “base salary” only. The Court held that this further breached the ESA as ESA notice must be paid on the basis of an employee’s “regular wages”, which includes “commissions” and is not limited to “base salary” only.
3. Finally, the “without cause” termination clause contained the language that the employer could terminate the employee’s employment “at any time” and in its “sole discretion”. The Court held that “the right of the employer to dismiss is not absolute” and that the ESA “prohibits the employer from terminating an employee on the conclusion of an employee’s leave (s. 53) or in reprisal for attempting to exercise a right under the [ESA] ) (s. 74).” Therefore, by inserting the words in its “sole discretion” and “at any time”, the termination clause contemplated a scenario where the employer could terminate an employee’s employment on the conclusion of a job protected leave or as reprisal, thereby breaching the ESA.
The Court of Appeal for Ontario upheld that decision in late 2024, finding that the termination clause failed to comply with the ESA and was void under the precedent set in Waksdale v. Swegon North America Inc.
Why This Case Matters: Waksdale Confirmed—Again
While Dufault is a significant win for employees seeking to challenge unenforceable termination clauses, it is equally important for what it confirms about Waksdale. In that landmark 2020 case, the Court of Appeal for Ontario ruled that if any part of a termination provision violates the ESA, the entire clause is invalid, even if the offending language is found in a “for cause” section and not directly relevant to the “without cause” termination in issue.
The Waksdale ruling marks the second time the Supreme Court of Canada has dismissed an application for leave to appeal refusing to uphold a termination clause that violates the ESA, solidifying its authority as settled law in Ontario.
Takeaways for Employers on ESA Compliance
The Dufault case is yet another warning to employers, municipal and otherwise, that ESA compliance is not optional. Even minor deviations from the ESA in a termination clause can render the entire provision void, exposing the employer to significant liability.
To reduce risk and ensure enforceability:
- Review all employment contracts, especially termination language, for full ESA compliance.
- Avoid “catch-all” clauses that might appear to oust ESA minimums or waive common law entitlements without proper language.
- Consult legal counsel when drafting or updating employment agreements, particularly for fixed-term contracts, where the cost of early termination can be substantial.
Need Help Drafting an Employment Agreement, Termination Clause or Terminating an Employee?
At Minken Employment Lawyers (Est. 1990), we help employers craft legally compliant, enforceable employment contracts that protect both their business interests and employee rights. This case serves as a powerful reminder: in employment law, the fine print matters!
If you have questions about your employment contracts or termination clauses, contact Minken Employment Lawyers (Est. 1990) today at 905-477-7011 or [email protected] for guidance on how to remain compliant and minimize legal risk.
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Please note that this article is for informational purposes only and does not constitute legal