Most employment agreements I review look fine. Clean formatting, professional language, all the right sections. And then I get to the termination clause — and find the one phrase that quietly unravels everything the company thought it had protected.
Here’s the hard part: these aren’t exotic mistakes. They turn up in agreements drafted by smart people — sometimes even by lawyers who didn’t catch a recent case. And in Ontario, a single bad clause doesn’t just weaken your protection; it can erase it entirely, and leave you owing a departing employee far more than you ever budgeted for.
After reviewing a lot of these, here are the five that cost employers the most — and how to fix each one.
1. The “for cause” definition that voids your entire termination clause
The trap: Your contract defines “just cause” using the common-law standard — serious misconduct that justifies dismissal. Sounds right. It isn’t. In Ontario, Waksdale v. Swegon established that if ANY part of your termination provisions violates the Employment Standards Act, the ENTIRE termination clause is void — even the parts that were perfectly fine. And the ESA’s bar for dismissing someone without notice (“wilful misconduct”) is far higher than common-law “just cause.” So a too-broad “for cause” clause doesn’t just fail on its own — it takes your whole severance cap down with it, and the employee gets full common-law reasonable notice (often 12–24 months for a senior person).
The fix: Define “cause” to track the exact ESA language — “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned.” Yes, it means a higher bar to fire without pay. It also means your clause actually holds.
2. The bonus clause that pays out after you let someone go
The trap: “Employee must be actively employed to receive a bonus.” Clean, common — and under Matthews v. Ocean Nutrition (Supreme Court of Canada), often unenforceable. If the language is ambiguous about whether “actively employed” includes the notice period, courts resolve it in the employee’s favour — and a terminated employee can claim the bonus that would have vested across their entire notice period. I saw this exact gap in a review this month; left as-is, it could have handed a departing executive tens of thousands in bonus they never worked for.
The fix: State plainly that no bonus earns, vests, or is payable during ANY notice period — statutory, contractual, or common-law — and that eligibility ends on the last day of active work. Crystal clear, or the employee wins.
3. The non-compete that’s already void
The trap: You added a non-compete to protect the business. In Ontario, since 2021, non-competes have been banned for employees — full stop — with a narrow exception only for “executives” (a short list of C-suite “chief” roles). Here’s where people get caught: a “General Manager,” “VP,” or “senior manager” title does NOT automatically qualify. If the role isn’t genuinely chief-level, the non-compete is void — and an unenforceable, illegal restriction is worse than none at all.
The fix: For most roles, don’t rely on a non-compete. A well-drafted non-solicitation (customers, suppliers, employees) plus confidentiality and IP assignment protects the vast majority of what you actually care about — and those hold up.
4. The agreement signed after the start date
The trap: You make a verbal offer, the person starts Monday, and the signed agreement — with all its restrictive covenants and termination terms — arrives a week later. In Canada, a contract needs “consideration” (something of value) to be binding. For a new hire, the job itself is the consideration — but ONLY if the agreement is signed before employment begins. Sign it after someone’s already working, with nothing new offered, and the covenants and termination clause can be unenforceable for lack of consideration.
The fix: The full agreement must be presented and signed before the first day — and it should be THE offer, not a document sprung after a simpler offer letter was already accepted.
5. The “exemption” you simply declared
The trap: “As a [professional], you are exempt from overtime and hours-of-work provisions under the ESA.” Writing it down doesn’t make it true. ESA exemptions apply to specific, defined categories — you can’t opt someone out of overtime by declaration. If the role doesn’t actually fit an exemption, the clause is unenforceable and you could owe back overtime.
The fix: Confirm the role genuinely fits an ESA exemption before claiming it. If it doesn’t, build the compensation model around that reality instead of papering over it.
The thread through all five
In Ontario, employment contracts are read in the employee’s favour, and the ESA is the floor you cannot contract below. The clauses above don’t fail loudly — they sit quietly in a clean-looking document until the day you need them, and then they’re gone.
The good news: every one of these is fixable in an afternoon, before you ever send an offer. Get your agreements reviewed now — not when you’re already standing in a termination you can’t afford.
