Canada: Contract of Employment

La Cour d'appel de l'Ontario a confirmé que les options d'achat d'actions et autres régimes fondés sur des actions ne seront pas automatiquement considérés comme une rémunération d'emploi ni comme une modalité...

The Ontario Court of Appeal has issued a significant ruling on how Restricted Stock Units must be treated during termination notice periods under employment law. This decision addresses whether RSUs continue to vest when an employee is terminated, both under statutory notice periods prescribed by the Employment Standards Act and under common law notice periods when contractual termination provisions are unenforceable.

Employment agreements are often treated as risk management tools. Employers rely on them to set workplace expectations and limit liability on termination. But an agreement only serves that purpose if it actually survives judicial scrutiny, and for the past few years, termination clause litigation in Ontario has increasingly turned on whether a court can find some theoretical reading of a clause that would violate the Employment Standards Act, 2000 ("ESA"), even where that plainly is not what the parties meant.

In March 2025, we wrote about the Ontario Superior Court's decision in Baker v. Van Dolder's Home Team Inc., a case that appeared to signal a significant shift in Ontario employment law. At the time, the Court held that a termination clause permitting an employer to terminate employment “at any time” was inconsistent with the Employment Standards Act (“ESA”),[2] rendering the employer's entire termination regime unenforceable, and entitling its employees to common law reasonable notice, regardless of the reason for their termination.

The Ontario Court of Appeal has ruled that employers cannot require employees to forfeit unvested equity compensation during statutory notice periods, even when paid in lieu of working notice.

The Administrative Labour Tribunal examined whether an employee's resignation during a nine-month working notice period constituted constructive dismissal or a voluntary departure. The case explores the legal distinction between an initial termination announced by the employer and a subsequent resignation, and whether management actions during the notice period can transform a resignation into a dismissal without cause.

The Ontario Court of Appeal has issued a landmark ruling on employment termination provisions, addressing whether contractual language permitting termination "at any time" or "for any reason" violates the Employment Standards Act. This decision overturns a controversial lower court ruling and provides crucial clarity for employers drafting termination clauses. The court emphasized a practical, contextual approach to interpreting employment contracts rather than isolating specific phrases.

Navigating the complexities of employing temporary foreign workers in Canada requires careful attention to work permit conditions, status tracking, and compliance obligations.

The Ontario Court of Appeal released multiple significant decisions during the week of August 3-7, 2026, addressing critical issues in employment law, medical malpractice, defamation, and property law. Notable rulings clarified the enforceability of termination provisions in employment contracts, particularly regarding "at any time" clauses and their consistency with Employment Standards Act minimum requirements, while also examining RSU entitlements and the application of statutory notice provisions.