The law as it relates to employment contracts has evolved substantially over the course of the past few years. A termination clause in an employment contract that was enforceable two years ago is likely not enforceable today. What that means is if you want to terminate an employee the termination pay and severance pay will not be limited to the Employment Standards Act but rather the common law. To give you an example of the difference between the ESA and the common law is as follows:

Let’s use the example that you want to terminate an employee without just cause a middle manager of 55 years old who has worked for your organization for 15 years the cost to you to terminate this employee under the ESA with an enforceable termination clause in your employment contract would be 8 weeks plus benefits. If the termination clause in the employment contract is not enforceable the cost to terminate this same employee, you will likely be somewhere between 12 and 15 months’ pay in lieu of notice. That is a substantial cost between an enforceable employment contract and one that is not enforceable.

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