Employment Agreement — Ontario Employment Law
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About Employment Agreement
In Ontario, an employment agreement is the foundational legal document that establishes the terms, conditions, and boundaries of the relationship between a worker and their employer. While the term is often used interchangeably with "employment contract," in legal proceedings, the "agreement" typically refers to the specific, formal written document and any attached schedules, such as stock option plans, commission policies, or confidentiality obligations.
Ontario employment agreements act as a customized rulebook for the workplace, but they do not operate in a vacuum. Every agreement must comply with the minimum standards set out in the Employment Standards Act, 2000 (ESA), as well as the Ontario Human Rights Code (OHRC). Employers cannot contract out of these statutory protections. If an employment agreement attempts to offer a worker less than their ESA minimum entitlements—for instance, by strictly limiting termination pay below statutory minimums—that specific clause is generally considered void. When a termination clause is struck down, the employee's rights default to "common law reasonable notice," which is typically much more generous than the ESA minimums.
Modern employment agreements are increasingly complex. As demonstrated by recent Ontario court decisions, they frequently govern intricate compensation structures like deferred bonuses, share acquisitions, and commission disbursements. A common dispute arises when an employee resigns or is terminated, and the employer refuses to pay out pending bonuses or commissions based on a technical reading of the agreement. In these situations, Ontario courts often apply the principle of "contra proferentem." This means that if an employer drafts a vague or ambiguous clause regarding compensation or restrictive covenants (such as non-solicitation or non-competition rules), the court will usually interpret the ambiguity in favour of the employee.
Additionally, employers generally cannot make significant, one-sided changes to a signed employment agreement—such as drastically cutting pay, altering a core commission structure, or marginalizing a worker's duties. Doing so without the employee's consent can result in a claim for constructive dismissal.
Because the enforceability of any workplace document hinges entirely on its precise wording and how it interacts with constantly evolving jurisprudence, relying on a layman's reading can be risky. Having a qualified legal professional evaluate the exact text of your specific agreement is the best way to understand your actual rights and obligations.
Frequently Asked Questions
What happens if a clause in my employment agreement violates the ESA?
If a provision in your employment agreement provides less than the minimum entitlements required by the Employment Standards Act (ESA), that specific provision is typically void and legally unenforceable. In the context of termination clauses, a void clause usually means you become entitled to common law reasonable notice instead.
Can my employer force me to sign a new employment agreement years after I started working?
An employer can ask you to sign a new agreement, but for it to be legally binding, they must provide you with "fresh consideration." This means you must receive something of value in exchange for agreeing to new terms, such as a signing bonus, a raise, or extra vacation time. Continued employment alone is not sufficient consideration in Ontario.
How do courts handle confusing bonus or commission clauses in an agreement?
Ontario courts generally rely on the contractual principle of "contra proferentem." Since the employer drafted the employment agreement, any vague wording or ambiguity regarding how commissions or deferred bonuses are paid out will typically be interpreted in the way that most benefits the employee.
Are non-solicitation clauses in an employment agreement actually enforceable in Ontario?
Yes, non-solicitation clauses can be uniquely enforceable, but only if they are reasonable. Courts will scrutinize the clause to ensure it is not overly broad in its geographic scope, duration, or restricted activities, and that it only protects a legitimate proprietary interest of the employer.
When is it necessary to have a lawyer look at my employment agreement?
You should seek legal counsel before signing a new agreement to ensure you aren't signing away important common law rights, or immediately if you are terminated. Since wording that seems standard to you might actually be legally invalid in Ontario, a professional review is crucial before accepting any severance offer.
Common Scenarios
- A sales representative resigns, and the company refuses to pay out pending commissions, relying on a confusingly worded addendum to their employment agreement that the employee never officially signed.
- A senior executive is terminated without cause, and a dispute arises over how to value the shares they acquired under their Employment and Share Acquisition Agreement.
- An employer unilaterally modifies a worker's job duties and significantly reduces their overall compensation, leading the employee to pursue a constructive dismissal claim for breach of the original employment agreement.
- An employee of five years is called into HR and told they must sign an updated employment agreement containing strict new confidentiality and non-solicitation restrictions, but they are not offered a raise or bonus for doing so.
What You Should Know
- Always keep copies of any supplementary documents referenced in your primary employment agreement, such as commission policies, bonus structures, or employee handbooks, as they form part of your binding contract.
- Do not assume that a restrictive covenant, like a non-solicitation or non-compete clause, is automatically valid or automatically void; its enforceability depends heavily on its precise wording.
- If your employer attempts to drastically change your duties, hours, or pay, document your objections in writing immediately. Accepting the changes silently could be viewed as implied consent to a new employment agreement.
- Never accept a severance package without first having an employment lawyer analyze the termination clause in your original employment agreement to verify if it actually holds up under Ontario law.
Featured Cases
Ballance It Inc. v. L.
2026 ONSC 5148 (CanLII) · 2026-09-10Employment Contract: Interlocutory Injunction Refused
This interlocutory proceeding addressed whether the employer established a strong prima facie case to restrain a former employee from breaching non-solicitation and confidentiality obligations under their employment agreement. The court assessed the reasonableness of restrictive covenants and the handling of confidential information on personal devices, ultimately refusing the injunction as the prima facie case was not met.
T. v. Salytics Inc.
2026 ONCA 621 (CanLII) · 2026-09-03T. v. Salytics: Constructive Dismissal Appeal
The Court of Appeal for Ontario dismissed an appeal challenging a ruling that a temporary lay-off clause was not a termination clause under the Employment Standards Act, 2000. The court addressed whether the lay-off constituted constructive dismissal at common law and interpreted the employment agreement's substance over form, confirming that the clause incorporated ESA requirements.
F. v. Sigma Lithium Corporation
2026 ONSC 2596 (CanLII) · 2026-05-01Constructive Dismissal: Damages for Unilateral Modifications
This case addresses whether unilateral modifications to duties and marginalization amounted to constructive dismissal, applying the Bardol factors to determine reasonable notice. The court found constructive dismissal established and awarded damages in lieu of notice, along with aggravated and punitive damages due to the employer's egregious conduct.
M. v. Salesfloor Inc.
2025 ONSC 3739 (CanLII) · 2025-06-24Unpaid Commissions: Resignation & Policy Incorporation
This case concerns a dispute over unpaid commissions owed to a former employee after her resignation. The court determined that the 2020 Commission Policy governed the plaintiff's entitlements because she did not consent to the 2021 policy changes. Applying the principle of contra proferentem to resolve ambiguities in the disbursement clause, the court found the plaintiff was the effective cause of the deals and entitled to the commissions earned before her resignation.
Brant Securities Limited v. G.
2025 ONCA 8 (CanLII) · 2025-01-09Brant Securities Ltd v G.: Amended Contract Consideration
This is an appeal to the Court of Appeal from a motion judge's decision granting summary judgment to the employer. The employer sued to enforce an amended promissory note against the dismissed employee, who counterclaimed for set-off of unpaid bonuses from 2014 and 2015. The motion judge found the amended note was valid and supported by fresh consideration, barring the employee's claims to the earlier bonuses. The Court of Appeal upheld this decision, agreeing that the amended note resolved the parties' past issues, deferred tax consequences, and extended interest-free status as valid consideration.
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.
B. v. Callidus Capital Corporation
2022 ONSC 3772 (CanLII) · 2022-06-23B. v. Callidus: Anti-SLAPP Stay in Constructive Dismissal
This interlocutory decision addresses procedural motions in an employment dispute involving constructive dismissal and deferred bonus payments. The court ruled that the statutory prohibition under s. 137.1(5) of the Courts of Justice Act precluded further steps on the counterclaim until the anti-SLAPP motion was disposed of, and deferred the summary judgment decision to ensure procedural fairness.
Orpheus Medica v. Deep Biologics Inc.
2020 ONSC 4974 (CanLII) · 2020-09-21Injunction Denied: Breach of Employment Restrictive Covenants
This is an interlocutory proceeding where the plaintiff sought an injunction against defendants for alleged breaches of non-competition and non-solicitation clauses in their employment agreements. The court found that the plaintiff failed to establish the existence of valid and enforceable agreements due to evidence of fabrication, and further determined that the plaintiff did not demonstrate irreparable harm. Consequently, the balance of convenience favored the defendants, and the injunction was not granted.
E. v. Disi-Peri Mgt. Inc.
2019 ONSC 618 (CanLII) · 2019-01-24Discovery in Wrongful Dismissal & Share Valuation
This is an interlocutory motion concerning discovery in a dispute involving wrongful dismissal and share valuation claims under an Employment and Share Acquisition Agreement. The court addressed whether financial source documents were relevant and proportional to the issues, rejecting the defendant's objections and ordering production of specific documents while excluding future projections.
2018218 Ontario Limited v. Realty Specialists Inc.
2019 ONSC 150 (CanLII) · 2019-01-07Security for Costs in Employment Covenant Dispute
This is a procedural ruling on a motion for security for costs in a dispute involving restrictive covenants and breach of employment agreements. The court ordered the corporate plaintiff to post security for costs due to insufficient assets, awarding fixed costs to the defendants.
L. v. Choice Bank
2018 ONSC 3225 (CanLII) · 2018-05-25L. v. Choice Bank: Employment Contract Renewal
This is a summary judgment motion concerning an employment agreement dispute where the plaintiff alleged the contract automatically renewed due to lack of written notice of non-renewal. The court granted summary judgment, interpreting the contract to require 30 days' notice for non-renewal and calculating damages based on base salary and performance bonuses for the renewed period.
K. v. RBC
2018 ONSC 2894 (CanLII) · 2018-05-10K. v. RBC: Limitation Period on Wrongful Dismissal
This is a summary judgment motion concerning whether the plaintiff's claims for wrongful dismissal and breach of employment agreement were statute-barred under the Limitations Act, 2002. The court rejected the plaintiff's argument that the limitation period was delayed by ongoing post-termination negotiations, holding that the claims were discoverable at or shortly after the time of termination.
MD Physician Services Inc. v. W.
2017 ONSC 2772 (CanLII) · 2017-07-21Non-Solicitation Agreement Interpretation
This case concerns the legal interpretation of a non-solicitation agreement between MD Physician Services Inc. and W. The primary issue is determining the scope and enforceability of the restrictive covenant within the context of their professional relationship.
M. v Delmar International
2016 ONSC 3448 (CanLII) · 2016-05-26Wrongful Dismissal: 7.5-Month Employee Awarded 4 Months Notice
This wrongful dismissal case addressed the reasonable notice period for a Director of Warehousing and Distribution employed for 7.5 months. The court awarded four months' notice, considering the Bardal factors. Additionally, the court determined that a guaranteed $25,000 bonus was not payable as the notice period did not extend to the one-year anniversary, and held that a car allowance was part of remuneration despite the employer's arguments regarding expense reimbursement.
R. v ZoomerMedia Limited
2016 ONSC 1567 (CanLII) · 2016-03-04Severance Pay: Contractual Entitlements Not Subject to Mitigation
This is a summary judgment motion concerning a breach of employment agreement where the plaintiff sought severance and sabbatical payments. The court applied contract interpretation principles to determine that the plaintiff was entitled to these fixed contractual payments and was not required to mitigate damages for them. The court also rejected the defendant's argument that the plaintiff had waived these rights and dismissed claims for bad faith or aggravated damages due to lack of evidence of high-handed conduct.
TSI International Group Inc. v. F.
2015 ONSC 1138 (CanLII) · 2015-02-20Fiduciary Duties: Employees Competing While Employed
This interlocutory proceeding involves former employees and directors who established a competing business while employed by the plaintiff. The court addressed whether the defendants breached their fiduciary duties and contractual obligations by misusing confidential information and usurping corporate opportunities. The plaintiff sought an interlocutory injunction and an Anton Piller order to restrain these activities.
L. v. The Bagg Group
2014 ONCA 718 (CanLII) · 2014-10-20This is an appeal to the Court of Appeal from a motion judge's decision granting summary judgment to an employment agency and dismissing the plaintiff's claim. The plaintiff alleged that the agency was contractually obliged to forward her job application for a specific position and committed a wrong by failing to do so. The motion judge dismissed the claim, finding that the plaintiff provided no evidence to support her bare allegations. The Court of Appeal agreed, finding no error in the conclusion that the plaintiff failed to adduce sufficient evidence. The appeal was dismissed, leaving the plaintiff's action dismissed.
Hargraft Schofield LP v. F.
2014 ONSC 5866 (CanLII) · 2014-10-10Employment Arbitration: Undue Delay Dismisses Stay Motion
This is a procedural ruling concerning a motion to stay proceedings in favor of arbitration in an employment dispute. The court determined that the arbitration clause in the first employment agreement did not apply to disputes arising under subsequent agreements and that the defendant's motion was brought with undue delay. Consequently, the motion to stay was dismissed, and the plaintiff was awarded costs.
D. v. Micom Technologies Ltd.
2012 ONSC 6897 (CanLII) · 2012-12-07Termination Clause: Waiver of Privilege via Pleadings
This is an interlocutory motion concerning civil procedure rules regarding amendments to pleadings and the withdrawal of admissions in an employment dispute. The plaintiff sought to amend their Reply to remove references to relying on legal advice regarding the enforceability of a termination clause, arguing that such reliance was irrelevant. The court dismissed the motion, finding that the plaintiff's state of mind and reliance on legal advice were central to the dispute over the ambiguous termination clause, and that pleading such reliance constituted an implied waiver of solicitor-client privilege.
R. v. Media Experts M.H.S. Inc.
2012 ONSC 3518 (CanLII) · 2012-06-15Exclusion Clauses & Individual Liability in Employment
This is an interlocutory motion to strike pleadings in a wrongful dismissal and tort action. The court addressed whether exclusion clauses in the plaintiff's employment agreement extended to individual defendants, shielding them from tort claims such as intentional and negligent infliction of nervous shock arising from the termination. Applying the principles from London Drugs Ltd. v. Kuehne & Nagel International Ltd., the court held that the exclusion clauses did protect the individual defendants acting within the scope of their employment, and struck the tort claims as having no reasonable prospect of success.