Key Ruling on Enforceability of Termination Clauses
Case Overview
- Plaintiff (Appellant): Gavin Bertsch (Vice-President, 8.5 months of service, $300K annual salary)
- Defendant (Respondent): Datastealth Inc.
- Key Issue: Whether the termination clause in Bertsch’s employment contract was enforceable, limiting his entitlements to Employment Standards Act (ESA) minimums.
Key Facts
- Bertsch was terminated without cause after 8.5 months and received 4 weeks’ pay (ESA minimum).
- He sued for common law wrongful dismissal damages, arguing the termination clause was void for violating the ESA.
- The motion judge dismissed his claim, finding the clause compliant with the ESA.
- Bertsch appealed, alleging ambiguity in the clause.
The Termination Clause in Question
The employment agreement stated:
“If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the Ontario Employment Standards Act, 2000 and its Regulations… You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination.”
Additional Safeguard (Clause 11(a)):
“If any of your entitlements under this Agreement are, or could be, less than your minimum entitlements under the ESA… you shall instead receive your minimum entitlements under the ESA.”
Court’s Analysis & Decision
- No Ambiguity in the Termination Clause
- Bertsch argued the clause could be misinterpreted to allow termination without ESA minimums for conduct short of “wilful misconduct” (i.e., guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer).
- The Court of Appeal rejected this, stating:
- The clause explicitly guaranteed ESA minimums “with or without cause.”
- The “failsafe” provision (Clause 11(a)) further ensured ESA compliance.
- Ambiguity requires more than “competing interpretations” (Amberber v. IBM Canada Ltd., 2018 ONCA 571).
- Clause Was ESA-Compliant & Enforceable
- The court upheld the motion judge’s ruling that the clause clearly excluded common law notice while preserving ESA rights.
- Unlike problematic clauses in cases like Waksdale v. Swegon, this one did not create illegal scenarios (e.g., denying ESA entitlements for non-wilful misconduct).
- Appeal Dismissed
- Bertsch’s claim for common law damages was barred.
- Costs of $10,000 were awarded to Datastealth.
Key Takeaways for Employers
Drafting Clear Termination Clauses:
- Explicitly state that terminations “with or without cause” will provide ESA minimums.
- Include a “failsafe” clause along the lines of “if any provision violates the ESA, the ESA prevails,” etc. (this should be drafted by an expert in employment law).
Avoiding Ambiguity:
- Ensure clauses cannot reasonably be read or understood to deny ESA rights (e.g., for non-wilful misconduct).
- “Wilful misconduct” is the only ESA exception for denying termination pay—define it carefully.
Legal Compliance Overrides Common Law:
- A well-drafted ESA-compliant clause can exclude common law notice entitlements.
Why This Case Matters
- It confirms that properly drafted termination clauses can limit liability to ESA standards.
- It reinforces the importance of precision in employment contracts; ambiguities will be struck down.
- It highlights the value of “failsafe” provisions to ensure ESA compliance.
💡HRC Tip:
Ensuring that your employment contract language limits your liability as much as possible in the event of a court challenge is something best left to the experts; we recommend that any such clauses or changes to your employment contracts are drafted by an employment lawyer or a seasoned HR professional.
Case Citation: Bertsch v. Datastealth Inc., 2025 ONCA 379.
