Stuart likes using the line: “just cause is not a lost cause” to support the proposition that while establishing just cause for dismissal is difficult, it is not impossible. The same is not true for termination clauses that purport to define “just cause”, a common law standard.
If you read our blog regularly, then you know that termination clauses are a hot topic. In Ontario just cause exists in parallel with a statutory standard:
- “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer (“wilful misconduct”).”, and
- where The Employment Standards Act (the “ESA”) defines wilful misconduct via regulation.
The upshot is that there are situations where an Ontario-regulated employee can:
- be guilty of just cause, but
- not of wilful misconduct.
Since wilful misconduct is required to disentitle an employee from their ESA minimums, a finding of just cause does not necessarily mean the guilty employee is not entitled to notice. They may very well be entitled to their ESA minimums.
This landscape has led to several court decisions where termination clauses are struck for defining just cause to include wilful misconduct. This is a clear breach of the ESA.
Who Needs Labels?
Ontario employers who work with HR counsel are aware that ‘playing’ with the definition of just cause is a lost cause. However, cases dealing with termination clauses that define just cause don’t get as much attention outside of Ontario, since there is no higher statutory standard in other jurisdiction.,.
However, the issue was front and center in a recent decision involving a federally regulated employer. In Ghazvini et al v. Canadian Imperial Bank Of Commerce, 2025 ONSC 5218 (not currently available online, “CIBC”), the court considered the enforceability of a termination for just cause provision which included acts the contract deemed to constitute just cause.
The ESA did not apply in CIBC because the employer was a bank; a federally regulated workplace. Accordingly, the Canada Labour Code (the “CLC”) was the governing employment standards statute. Under the CLC, a dismissal for just cause disentitles the employee from any notice. The CLC does not define just cause; it is a common law standard commonly defined to include serious misconduct. As the employer found out, the lack of a statutory definition does not mean it was open to redefine just cause via contract.
The termination provision at issue provided as follows:
“Cause includes, but is not limited to, dishonesty, fraud, breach of trust, failure to perform your duties in a satisfactory manner… failure to complete the pre-employment 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.”
The Court found that the clause defined just cause much more broadly than its definition at common law, effectively contracting out of the CLC. At common law, just cause can encompass a variety of misconduct, however, the misconduct must be serious. The clause did not make that clear. Since employment standards statutes cannot be contracted out of, the Court struck the entire termination clause.
The employee, a 38 year old with four and a half years of service, was awarded seven months of reasonable notice at common law, in the amount of $132,959,49 accounting for:
- salary,
- incentive pay,
- bonus, and
- benefits.
In contrast, the contract had provided for two weeks per year of service.
Interestingly, the Court applied the Waksdale principle to strike the without cause provision, confirming that an unlawful just cause provision outside of Ontario jurisdiction will compromise the without cause provision (at least in the federal arena).
Less is More
Given the decision in CIBC and all the other recent decisions regarding termination clauses, our standard advice to avoid extraneous language is even more relevant.
Employment Contracts
Employer clients outside of Ontario often ask if we can include a just cause provision in the contract, with examples of what would constitute just cause.
Our response is that we can, but even when properly drafted the risk of defining just cause and including examples is that a court might find that the definition, or examples, are not true examples of just cause. Consequently, the employer may end up paying substantial severance based on common law, which is what they were trying to avoid in the first place.
As such, these provisions are best either left out – you can still assert just cause without the wording in the contract – or kept very brief, e.g.: “your employment may be terminated for just cause in accordance with the requirements of the CLC.”
Workplace Policies
Likewise, our employer clients sometimes ask about including “zero tolerance” language in their policies.
We encourage our clients to include wording highlighting how important a policy is – for example their anti-harassment and discrimination policy – but it is important to keep in mind just because the policy states there is zero tolerance, it does not mean that a court would agree. There will always be a contextual analysis to assess whether the misconduct in question was in fact just cause, even if the misconduct fell under an employer’s zero tolerance policies.
If you’re an employer, we can work with you to draft and implement strong employment agreements that stand our courts’ scrutiny, and lock in your obligations upon dismissal to provide cost certainty.
If you’re an employee, we can work with you to assess your entitlements upon dismissal and determine whether the termination clause in your contract is enforceable. Spoiler alert, these clauses are often vulnerable to challenge, so you may be entitled to a lot more.
