Breach of Contract — Ontario Employment Law
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About Breach of Contract
In Ontario employment law, a 'breach of contract' occurs when either the employer or the employee fails to fulfill a key obligation outlined in their employment agreement. While many people associate this term with being fired, a breach can encompass a much wider range of issues and can be initiated by either party. The employment contract itself is a combination of written terms, verbal promises, and implied terms derived from common law and minimum standards set by legislation like the Employment Standards Act, 2000 (ESA).
For an employer, a breach could be the obvious act of terminating an employee without providing the required notice or pay in lieu, which is a wrongful dismissal. However, it can also be more subtle. For example, unilaterally demoting an employee, significantly reducing their pay, failing to pay an earned bonus or commission, or changing their work location without agreement can all constitute a breach. When an employer's action is so significant that it fundamentally alters the employment relationship, it may be considered a 'constructive dismissal,' a topic covered in more detail on its own page.
Employees can also breach their employment contracts. This commonly occurs when an employee resigns without giving the contractually required amount of notice, especially if they are in a key role. Other examples include the misuse of confidential company information, violating a non-solicitation clause after departure, or engaging in competitive activity contrary to a valid restrictive covenant. The consequences of a breach depend on its severity. A 'fundamental breach' is one that goes to the core of the contract, entitling the non-breaching party to consider the contract at an end and sue for damages. A less severe breach may only entitle them to damages for the specific loss suffered. Because the terms of each employment agreement and the facts of each situation are unique, understanding whether a specific action constitutes a breach often requires a careful legal analysis.
Frequently Asked Questions
What counts as a breach of an employment contract in Ontario?
A breach is any failure to meet a significant term of the employment agreement. This can include an employer's failure to pay you correctly, a unilateral demotion, or termination without proper notice. It can also include an employee quitting without giving required notice or violating a confidentiality clause.
My employer didn't pay my promised annual bonus. Is that a breach of contract?
It can be. If your contract or a written policy creates a clear entitlement to the bonus, the failure to pay it could be a breach of contract. The specific wording of the bonus plan is critical in determining your rights.
Can I be sued by my old employer for breaching my contract?
Yes, although it's less common, employers can sue former employees. This typically happens if an employee in a senior or critical role resigns with no notice, causing the company financial loss, or if they breach a restrictive covenant like a non-solicitation clause.
Is there a time limit to sue for breach of an employment contract in Ontario?
Yes, in most cases, you have two years from the day you discovered the breach to start a legal claim. This is a strict deadline under Ontario's Limitations Act, 2002, so it's important to act promptly.
My contract says I'm an 'independent contractor' but I'm treated like an employee. Can this be a breach?
This is a case of potential employee misclassification. While not a breach of the written contract itself, it means the employer may have breached their statutory obligations under the Employment Standards Act, 2000 by failing to provide you with employee entitlements like vacation pay, overtime, and termination pay.
When should I consult an employment lawyer about a potential contract breach?
You should consider consulting a lawyer as soon as you believe a significant term of your employment has been violated, such as your pay, job duties, or status. It's also wise to seek advice if your employer accuses you of a breach, as the consequences can be serious.
Common Scenarios
- An employer promises a specific health and dental benefits package in an offer letter but then provides a much less comprehensive plan after the employee starts.
- A senior marketing manager signs a contract with a non-solicitation clause, but upon resigning, immediately contacts and secures her top three former clients for her new competing firm.
- A company is acquired, and the new owner changes the commission structure for the sales team, resulting in a 30% average reduction in their total compensation.
- An employee is hired for a remote-first position based in Toronto, but six months later, the employer mandates a full-time return to their office in Barrie.
- A skilled tradesperson quits their job without giving the four weeks' notice required in their contract, forcing the employer to delay a critical project and hire a temporary replacement at a premium.
What You Should Know
Featured Cases
C. v. W.
2026 ONCA 634 (CanLII) · 2026-09-10C. v. W.: Fiduciary Duties and Joint Ventures
This was an appeal to the Court of Appeal from a trial judge's decision dismissing the plaintiffs' claims and allowing the defendants' counterclaim for breach of contract. The employee and his company claimed breach of confidence, breach of fiduciary duty, and breach of a joint venture agreement regarding a research and development project, while the employer counterclaimed for negligent misrepresentation and breach of contract. The trial judge dismissed the plaintiffs' claims and awarded $1 to the employer on the counterclaim because the employee took work product when he resigned. The Court of Appeal upheld the dismissal of the plaintiffs' claims because they were employees and commercial parties with no joint venture or fiduciary relationship, but allowed the appeal on the counterclaim, dismissing it because the breach was not pleaded and there was no evidence of what was taken. The costs appeal was dismissed.
Riva Plumbing Limited v. F.
2026 ONCA 297 (CanLII) · 2026-04-24Riva Plumbing Limited v. F. - Unpaid Bonus, Non-Compete
This is an appeal to the Court of Appeal from a trial judge's decision dismissing the appellants' claims and allowing a counterclaim. The employer sued former employees for economic torts, breach of fiduciary duties, and breach of a settlement agreement containing non-competition clauses. One former employee counterclaimed for an unpaid bonus. The trial judge dismissed the employer's claims due to lack of evidence and allowed the counterclaim, finding the bonus was non-discretionary and did not require ongoing employment. The Court of Appeal dismissed the appeal, finding no errors in the trial judge's factual and credibility findings.
YG Limited Partnership and YSL Residences Inc. (Re)
2025 ONCA 591 (CanLII) · 2025-08-14Employee Profit-Share is Contract Damages, Not Equity Claim
An appeal to the Court of Appeal from an order of the Superior Court of Justice concerning an employee's profit-sharing claim in a bankruptcy proposal. Maria Athanasoulis claimed $18 million for breach of a profit-sharing agreement. The Trustee disallowed the claim as an equity claim and too contingent. The appeal judge reversed this, finding it was an unliquidated claim for damages for breach of an employment contract. The Court of Appeal upheld the appeal judge's decision, dismissing the appeals of the Trustee and limited partners.
B. v. 6HARMONICS INC.
2025 ONSC 3610 (CanLII) · 2025-06-18Wrongful Dismissal: Default Judgment for 9 Months' Salary
This is a default judgment motion in a wrongful dismissal case where the defendant failed to respond to the action. The court found the defendant liable for breach of the employment agreement, specifically for failing to pay nine months' salary as stipulated in the contract. Applying the principle from Bowes v. Goss Power Products Ltd., the court held there was no duty to mitigate damages where the contract fixed liquidated damages, awarding the plaintiff $184,166.69 in damages.
P. v. ITCAD Tech Inc.
2025 ONSC 1697 (CanLII) · 2025-06-02Independent Contractor Non-Compete & Punitive Damages
This case addresses whether the plaintiff was an employee or independent contractor and the enforceability of a non-competition clause in their agreement. The court upheld the independent contractor relationship and found the 12-month non-compete restriction reasonable. Damages for breach of the non-compete were awarded, along with punitive damages for the withholding of funds.
W. v. X.
2025 ONSC 850 (CanLII) · 2025-02-06Employment Agreement Enforceability: Summary Judgment Dismissed
This is a procedural ruling on a motion for partial summary judgment in a dispute concerning the enforceability of an alleged employment agreement. The plaintiff sought damages for breach of contract and tortious interference, alleging a valid employment agreement existed to secure mortgage approval. The court dismissed the motion, finding that credibility issues and an incomplete evidentiary record necessitated a full trial.
Abaxx Technologies Inc. v. Pasig and Hudson Private Limited
2024 ONCA 164 (CanLII) · 2024-03-01Appeal Dismissed on Jurisdiction Over Former Executive
This is an appeal to the Court of Appeal from a motion judge's decision dismissing the action for lack of jurisdiction. The employer plaintiffs sued a former executive and related companies for breach of fiduciary duties, conspiracy, and misappropriation of corporate opportunities. The motion judge found that the plaintiffs failed to establish a real and substantial connection to Ontario, as the defendants were foreign and the relevant business occurred outside the province. The Court of Appeal agreed that the plaintiffs did not demonstrate a good arguable case for jurisdiction in Ontario. The appeal was dismissed.
Northwest Protection Services Ltd. v. W.
2024 ONSC 1292 (CanLII) · 2024-03-01This is a contractual dispute involving allegations of breach of contract, fiduciary duty, and breach of confidence against an individual associated with Northwest Protection Services Ltd. The case also raises issues of constructive trust and misrepresentation under the Private Security and Investigative Services Act.
OZ Optics Ltd. v. E.
2023 ONCA 677 (CanLII) · 2023-10-16Oz Optics v. E.: Breach of Employment Agreement Appeal
This is an appeal from a summary judgment decision involving former employees of Oz Optics Ltd. The appellant alleged that the respondents breached their employment agreements by servicing other clients and failing to fulfill holdover obligations. The Court of Appeal upheld the motion judge's finding that no breach occurred and that no damages were proven.
M. v Ontario
2023 ONSC 3537 (CanLII) · 2023-06-12Tribunal Members: No Employment Contract on Non-Renewal
This is a civil procedure ruling on a motion to strike a class action claim brought by adjudicative tribunal members. The court determined that fixed-term appointments to these tribunals do not create enforceable employment contracts or a contractual entitlement to reappointment, and that the non-renewal of such appointments does not disclose a reasonable cause of action.
Crosslinx Transit Solutions v Ontario Infrastructure
2023 ONSC 3500 (CanLII) · 2023-06-12This is a procedural ruling in a labour relations dispute concerning the interpretation and enforcement of a collective agreement. The case involves allegations of breach of contract and civil procedure issues related to arbitration.
G. v PearTree Securities Inc.
2023 ONSC 3197 (CanLII) · 2023-05-29Wrongful Dismissal: Contract Enforceability & Punitive Damages
This wrongful dismissal case addressed the enforceability of two employment contracts, finding both valid with the second supported by fresh consideration. The court ruled that the employer breached the contract by suspending salary payments and imposing unauthorized conditions, awarding salary continuance and variable compensation. Additionally, non-competition clauses were found unenforceable as overly broad, and the employer was ordered to pay $10,000 in punitive damages for high-handed conduct.
W. v. Geo. A. Kelson Company Limited
2023 ONSC 29 (CanLII) · 2023-01-03Employer Duty of Good Faith: Share Purchase Plan Dispute
This case addresses the employer's contractual obligations toward a former employee regarding the administration of an employee share purchase plan. The court examined whether the employer breached the duty of good faith and repudiated the Share Purchase Agreement by failing to pay correct interest on installments. The court dismissed allegations of bad faith, finding the employer intended to fulfill its obligations, and upheld the agreement while ordering corrections to interest calculations.
S.I. Systems Partnership v. G.
2022 ONCA 138 (CanLII) · 2022-02-11Independent Contractor Restrictive Covenant Claim Dismissed
This is an appeal to the Court of Appeal from a trial judge's decision regarding a breach of restrictive covenants. The plaintiff company sued two independent contractors for allegedly breaching their contracts. The trial judge dismissed the claim, finding the covenants were not brought to the contractors' attention, were unenforceable, and the plaintiff failed to prove damages. The Court of Appeal dismissed the appeal because the plaintiff did not appeal the finding concerning damages, leaving no basis to set aside the trial judge's order.
T. v. Paris Kitchens
2022 ONSC 749 (CanLII) · 2022-02-02T. v. Paris Kitchens: Constructive Dismissal Claim
This case addresses whether an employee's demotion from Regional Sales Manager to Project Manager and the employer's cumulative conduct constituted constructive dismissal. The court applied the test from Potter v. New Brunswick Legal Aid to determine if essential terms of the employment contract were substantially altered. The court found that no constructive dismissal occurred, thereby rendering a damages analysis unnecessary.
P. v. Bravo Logistics Corporation
2021 ONSC 4455 (CanLII) · 2021-06-23P. v. Bravo Logistics: Working Notice Appeal
This is an appeal from a trial judge's decision in a wrongful dismissal case involving an employee with seven years of service who was terminated without a written employment contract. The central issue was whether the employer's provision of ten weeks' working notice, later breached by preventing the employee from returning to work, constituted a valid agreement enforceable for damages or if it allowed the employee to claim common law notice. The Divisional Court reviewed whether the trial judge erred in enforcing the agreement and assessing damages based on the unpaid balance of that notice period.
M.D. v. EcoPower Inc.
2021 ONSC 3923 (CanLII) · 2021-05-31Unpaid Income Claim: Employment Standards Breach
An employment dispute involving an employee's claim for unpaid income against their employer, EcoPower Inc. The case addresses breaches of contract and violations of the Employment Standards Act, specifically regarding unpaid wages and applicable interest.
S.I. Systems Partnership v. G.
2020 ONSC 8086 (CanLII) · 2020-12-23Non-Compete Enforceability in Consulting Agreements
This case addresses the enforceability of non-competition clauses in consulting agreements between an IT service provider and its consultants. The court found the clauses unenforceable due to unreasonable breadth, lack of geographical and project-specific limitations, and failure to demonstrate proprietary interest. Consequently, the plaintiff's claims for breach of contract and inducing breach of contract were dismissed, with only nominal damages awarded due to a lack of evidence of financial harm.
P. v. P.
2020 ONCA 531 (CanLII) · 2020-08-26P. v. P.: Oppression Claim and Wrongful Dismissal
This was an appeal to the Court of Appeal from a trial judge's decision in a breach of contract and oppression action. The employee sold his business and entered an employment contract with the buyer's company, which quickly went bankrupt after the employee was dismissed. The trial judge found the employee was wrongfully dismissed but held that the claim could only be pursued in bankruptcy because the contract was with the bankrupt company. The Court of Appeal upheld the dismissal of the employment claim, agreeing there was no oppressive conduct linked to the dismissal, but allowed the appeal in part to award $750,000 for the unpaid share purchase price under the commercial agreement.
C. v. Her Majesty in Right of Canada
2019 ONSC 4851 (CanLII) · 2019-08-16This is a wrongful dismissal case involving a breach of contract and misrepresentation claim against the Crown. The dispute centers on damages arising from the dismissal.