Waksdale v. Swegon: Why Pre-2020 Employment Agreements Are Likely Unenforceable

What the Court of Appeal Actually Decided

In June 2020, the Ontario Court of Appeal released its decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391 — a decision that invalidated thousands of employment agreements across Ontario overnight. The core holding is deceptively simple: if any provision within the termination section of an employment agreement is unenforceable under the Employment Standards Act (ESA), the entire termination scheme fails. The employee is entitled to common law reasonable notice, regardless of which specific clause is deficient and regardless of whether the employer relied on that clause.

The facts were straightforward. Waksdale's employment agreement contained two termination provisions: a "termination without cause" clause and a "termination for cause" clause. The employer terminated Waksdale without cause and complied with the without-cause provision. Waksdale argued that the for-cause clause — which purported to disentitle him from any notice or pay in lieu, potentially including ESA minimums — was unenforceable, and that its unenforceability contaminated the entire termination scheme.

The Court of Appeal agreed. Justice Thorburn, writing for the panel, held that termination clauses must be read as a "single, integrated package." If one component of that package violates the ESA — even a component that was not triggered and that the employer never sought to rely on — the entire termination framework is void, and the common law applies.

Why This Matters: Common Law vs. ESA Entitlements

The practical significance of Waksdale depends on the gap between ESA minimums and common law reasonable notice. Under the ESA, the maximum notice entitlement is eight weeks of notice plus a severance payment of one week per year of service (capped at 26 weeks) for employees with five or more years of service at employers with a payroll of $2.5 million or more. Many employees — particularly at startups — receive far less than the ESA maximums.

Under common law, reasonable notice is assessed based on the Bardal factors: age, length of service, character of the employment (including seniority and compensation), and the availability of similar employment. Common law notice periods routinely exceed ESA minimums by a wide margin. A senior employee with ten years of service might receive 12-18 months of common law reasonable notice, compared to an ESA entitlement of eight weeks' notice plus ten weeks' severance.

When Waksdale voids a termination clause, the employee goes from the contractual entitlement (which is typically at or near ESA minimums) to common law reasonable notice — which, for many employees, represents a difference of tens or hundreds of thousands of dollars.

The Progeny: How Courts Have Applied Waksdale

Since Waksdale, Ontario courts have applied and extended the decision in a series of cases that have raised the enforceability standard even further:

• Henderson v. Slavkin et al., 2022 ONSC 2822: The court found that a termination clause was void because it could, in certain hypothetical scenarios, permit a payment below ESA minimums — even though on the facts of the case, the clause produced a payment above the ESA floor.
• Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451: The Court of Appeal confirmed that subjective language in a for-cause provision — such as clauses that allow the employer to determine whether cause exists — can void the entire termination scheme because the employer might apply a lower threshold than the ESA's "wilful misconduct" standard.
• Bertsch v. Datastealth Inc., 2024 ONSC 5593: The court struck down a termination clause that used language inconsistent with the ESA's specific terminology, reinforcing the principle that termination clauses must precisely mirror ESA language to survive challenge.

The Three Most Common Deficiencies in Pre-2020 Agreements

1. For-Cause Clauses That Exceed ESA Standards

The ESA allows termination without notice or pay in lieu only for "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer." Many pre-Waksdale employment agreements use broader language — "cause," "just cause," or a list of termination events that goes beyond the ESA standard. Under Waksdale, this broader for-cause provision contaminates the entire termination scheme, even if the employer terminates without cause and does not rely on the for-cause clause.

2. Failure to Account for Benefit Continuation

The ESA requires employers to continue benefit plan contributions during the statutory notice period. Many pre-Waksdale termination clauses provide for a lump-sum payment in lieu of notice but do not address benefit continuation, or they explicitly exclude benefits from the notice payment. This omission can render the clause unenforceable because it theoretically permits a payment below ESA minimums.

3. Ambiguous Language About ESA Compliance

Some agreements contain "saving" language — e.g., "the employee will receive the greater of their entitlement under this agreement and their entitlement under the ESA." While this language is intended to cure any ESA deficiency, courts have been inconsistent about whether it actually works. The safer approach is to draft each provision to independently comply with the ESA, without relying on a saving clause as a backstop.

What You Need to Do Now

If your employment agreements were drafted before June 2020, they almost certainly contain at least one Waksdale vulnerability. The for-cause clause is the most common deficiency, but benefit continuation, severance pay, and notice calculation provisions are also frequent sources of failure.

The fix requires a complete rewrite of the termination section — not a patch or an amendment to a single clause. Because Waksdale treats the termination provisions as an integrated package, every clause must independently comply with the ESA. The for-cause provision must mirror the ESA's "wilful misconduct" language. The without-cause provision must provide for notice, pay in lieu, severance pay (where applicable), and benefit continuation that meets or exceeds ESA minimums in every scenario.

Presenting new employment agreements to existing employees also requires fresh consideration — under Hobbs v. TDI International Bridges Inc., 2008 ONCA 566, a change to the terms of an existing employment relationship requires new consideration, such as a signing bonus, salary increase, or additional benefit. Simply requiring existing employees to sign a new agreement without fresh consideration may render the new agreement unenforceable.

The Supreme Court Declined to Hear the Appeal

The Supreme Court of Canada denied leave to appeal in Waksdale, which means the decision stands as binding authority in Ontario and highly persuasive authority across Canada. While other provinces have not yet adopted Waksdale explicitly, the analytical framework — reading termination provisions as an integrated package and measuring each component against employment standards legislation — is consistent with general principles of contractual interpretation and is likely to influence courts in every Canadian jurisdiction.

If your employment agreements have not been updated since 2020, the question is not whether they are enforceable. It is how much the gap between your contractual termination provisions and common law reasonable notice will cost you when an employee challenges them.