A termination clause is a term in an employment contract which sets out how much notice, or pay in lieu of notice, the employer is required to provide to the employee in order to terminate the contract without cause. When there is a valid termination clause in an employment contract, the employer is not required to provide reasonable notice of termination to the employee. Instead, the employer is only required to provide the amount of notice, or pay in lieu of notice, that is set out in the termination clause.1
In order to be enforceable, a termination clause must be carefully drafted. A termination clause which fails to comply with the minimum requirements of the Employment Standards Act may be invalid.2 Similarly, a termination clause which is unclear or ambiguous may be invalid.3
The employment contract which contains the termination clause must also be valid in order for the termination clause to be enforceable. If the employment contract is invalid (for example, if the employee received no consideration in exchange for signing the contract), then the termination clause contained in the invalid contract will not be enforceable.
If a termination clause is unenforceable, in most cases this will mean that the employee is entitled to reasonable notice if they are terminated without cause.