In 2020, the Ontario Court of Appeal released its seminal decision in Waksdale v. Swegon North America Inc., which held that termination provisions in an employment contract are unenforceable if, in whole or in part, they fail to meet Ontario’s minimum employment standards. In response, many Ontario employers promptly revised their termination provisions to ensure compliance with provincial employment standards legislation.
However, after Waksdale, federally regulated employers were left questioning whether the same principle applied to employment contracts governed by the Canada Labour Code (the CLC). In Ghazvini v. CIBC (Ghazvini), the Ontario Court of Appeal has now confirmed that the Waksdale principle also applies to employment contracts governed by the CLC, at least in Ontario.
Here’s What Federally Regulated Employers Need to Know Now:
- The Waksdale principle applies to federally regulated employment contracts.
- If a “for cause” termination provision permits dismissal without notice for conduct that falls short of “just cause” under the CLC, the entire termination provision is unenforceable. This principle applies even if the employee was terminated without cause.
- A general saving clause is not enough. A broad promise to comply with employment standards legislation will not cure a defective provision that breaches minimum employment standards.
Background Facts in Ghazvini
CIBC, like all other Canadian banks, is a federally regulated employer under the CLC. As part of a restructuring, CIBC terminated two employees without cause. CIBC relied on the termination provisions in their employment contracts to provide only minimum termination entitlements under the CLC.
The termination clause contained the following “for cause” provision:
By CIBC for Cause – CIBC may terminate your employment at any time without advance notice, or pay in lieu of notice, for Cause. Cause includes, but is not limited to, dishonesty, fraud, breach of trust, failure to perform your duties in a satisfactory manner, a breach of the Code, failure to obtain or maintain any required TLAs, failure to complete the preemployment screening process to the satisfaction of CIBC, providing false, misleading or inaccurate information during the hiring process, a breach of any other term or condition of your employment, and any act or omission recognized as Cause under applicable law. If your employment is terminated for Cause, you will have no entitlement to any notice of termination, payment in lieu of notice of termination, severance or any other damages whatsoever. [emphasis added]
The termination provision also included a “Compliance with Legislation” clause, often referred to as a saving clause, whereby CIBC promised to comply with all termination requirements of applicable employment standards legislation.
Although the employees were terminated without cause, they argued that the “for cause” provision was unenforceable because the definition of “cause” and conduct described in the agreements was broader than “just cause” defined under the CLC.
The Court’s Conclusions in Ghazvini
Both the lower court and ultimately the Ontario Court of Appeal found that the “for cause” provision was unenforceable. The non-exhaustive list of examples in the “for cause” provision included matters that could, but not necessarily, amount to just cause under the CLC. Although the “just cause” standard is not expressly defined in the CLC, case law has established that “just cause” requires misconduct that goes to the root of the employment relationship. “Dishonesty,” for example, is a broad term that could include less serious conduct that would not meet the standard for a just cause dismissal.
As a result of the illegal “for cause” provision, the entire termination provision was rendered unenforceable, including the “without cause” provision that CIBC relied on. The “Compliance with Legislation” provision was insufficient to save the unenforceable “for cause” provision and bring it into compliance with the CLC.
The employees were ultimately entitled to common law reasonable notice, which included variable incentive pay and bonus they would have earned during the notice period.
What Does Ghazvini Mean for Federally Regulated Employers?
In Ontario (at least), Ghazvini and other decisions such as Waksdale have established that an employer cannot rely on a “without cause” termination provision where the “for cause” provision violates employment standards legislation. However, it remains to be seen whether this approach will be followed in other Canadian jurisdictions outside Ontario. Case law in British Columbia,1 for example, has historically been more favourable to employers when interpreting termination provisions.
For now, federally regulated employers in Ontario can reduce the risks associated with drafting a termination clause by considering the following:
- Preserve Minimum Statutory Entitlements: An enforceable termination clause must preserve an employee’s statutory entitlements as prescribed by employment standards legislation.
- Jurisdiction Matters: The definition of “cause” differs across Canadian jurisdictions. Some employment standards legislation expressly defines what constitutes cause sufficient to warrant termination without notice/pay in lieu, while other jurisdictions have established the definition of cause through jurisprudence. For federally regulated employers with employees across multiple jurisdictions, consider seeking legal advice to ensure your employment agreements comply with local employment standards.
- Listing “For Cause” Conduct Requires Careful Drafting: Many “for cause” termination provisions include a laundry list of conduct that permits termination without notice. However, if any of the prescribed conduct falls short of the statutory standard required to terminate employment without notice/pay (such as general performance issues, broad dishonesty, or breach of any company policy), the provision is void and renders the whole termination provision unenforceable.
- A Compliance/Saving Clause May Not Cure Deficient Termination Provisions: General saving clauses that attempt to cure violations of employment standards legislation are unlikely to be successful. However, a well-drafted saving clause included in a termination provision can be used effectively to bring a termination provision into alignment with employment standards legislation, provided it clearly preserves minimum statutory entitlements.2
Please contact any member of our Employment & Labour Group if you have any questions.
1 For example: Forbes v Glenmore Printing Ltd., 2023 BCSC 25 and Egan v. Harbour Air Seaplanes LLP, 2024 BCCA 222.
2 Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568 at para. 73.