By Barry W. Kwasniewski and Martin U. Wissmath

Termination Clause Struck Down Again as Ontario Court of Appeal Favours Employee

In De Castro v Arista Homes Limited, the Ontario Court of Appeal reaffirmed its strict approach to interpreting termination provisions in employment contracts, dismissing an employer’s appeal and upholding a lower court’s decision to award eight months’ common law notice to an employee dismissed without cause. This judgment, released April 3, 2025, provides another important example of the court’s movement towards a narrow application of employment laws in favour of employees in Ontario which will be of interest to charities and not-for-profits.

Ellen De Castro (the “Employee”), was employed by Arista Homes Limited, (the “Employer”) for four years and nine months before being dismissed without cause. Relying on the termination provision in her employment contract, the Employer paid the Employee four weeks’ salary in lieu of notice under the Employment Standards Act, 2000 (the “ESA”). The Employee commenced an action for wrongful dismissal, arguing that the for-cause termination clause in her contract was unenforceable and, as such, the without-cause provision also failed pursuant to the principles established in the 2020 Waksdale v. Swegon North America Inc. decision. The Employee brought a motion for summary judgment and was awarded damages equivalent to eight months’ reasonable notice.

The Employer appealed, arguing that the motion judge had erred in interpreting the termination for cause provision. The clause permitted termination without notice where the Employee was terminated for “Cause” or for misconduct including breach of the employment agreement, disobedience, or neglect of duty. “Cause” was defined to include conduct that would “in law” permit termination without notice. The motion judge had found that the clause permitted dismissal in circumstances that did not meet the ESA’s narrow standard of “wilful misconduct,” as defined in ESA Regulation 288/01, rendering the provision void and unenforceable.

The Court of Appeal upheld the motion judge’s reasoning. It found that the termination language contravened the ESA by allowing dismissal without notice for conduct that might not meet the wilful misconduct threshold. The court rejected the Employer’s argument that the clause should be interpreted in a manner consistent with the ESA, noting that the actual wording of the contract must be legally compliant, regardless of the Employer’s intent. Due to employees having less bargaining power than employers, the court emphasized that ambiguous provisions must be interpreted in favour of the employee, in line with established jurisprudence such as Wood v. Fred Deeley Imports Ltd. and Machtinger v. HOJ Industries Ltd.

This ruling, and others like it in recent years, is significant for all employers in Ontario, including charities and not-for-profit organizations, who are subject to the same legal standards as for-profit enterprises. The court’s approach reinforces that poorly drafted or overly broad termination clauses will be struck down, exposing employers to liability for common law notice. Careful contract review and ESA compliance remain critical to limiting such risk.

Ontario Minimum Wage Rising to $17.60 on October 1, 2025

Ontario’s general minimum wage will increase from $17.20 to $17.60 per hour on October 1, 2025. Announced April 1, 2025, this 2.4% rise reflects the annual adjustment based on the Ontario Consumer Price Index (CPI), as required under the Employment Standards Act, 2000. The increase maintains Ontario’s position as having the second highest provincial minimum wage in Canada.

A full-time minimum wage worker (40 hours per week) will see an annual wage increase of up to $835. Approximately 36% of workers earning at or below $17.60 per hour are in the retail trade sector, with another 24% in accommodation and food services.

This adjustment follows the passage of the Working for Workers Six Act, 2024, part of ongoing legislative efforts to modernize labour protections and reduce employment barriers across the province. Since 2018, Ontario’s minimum wage has risen from $14 to $17.60 per hour.

​Read the April 2025 Charity & NFP Law Update