Employment Contract Must-Have Clauses: Waksdale Alert &…

1. Why Employment Contracts Are Your Most Expensive Legal Risk

Most small business owners treat employment contracts as formalities. In Canada, a poorly drafted employment contract can cost the difference between 3 weeks’ severance (ESA minimum) and 12–18 months’ common-law pay for the same termination. The gap between a compliant and non-compliant contract can reach tens of thousands of dollars.

This article covers the 12 must-have clauses in Canadian employment contracts, the prohibited clauses by province, and the most common drafting traps employers fall into across Ontario, Quebec, BC, and Alberta.

2. Ontario’s Core Risk: The Waksdale “Contamination” Doctrine

The Ruling

Waksdale v Swegon North America Inc (2020 ONCA 391) is Ontario’s most consequential employment law decision in a decade. The Ontario Court of Appeal held:

A contract must be read as a whole. If the just cause termination clause violates ESA minimum standards — even if it was never invoked — the entire termination clause is void. The employee reverts to common-law reasonable notice entitlements.

What “Contamination” Means

Many contracts contain just cause clauses like: “The employee may be terminated immediately for serious misconduct, without notice or compensation.” This appears reasonable but falls short of the ESA’s threshold. Section 1(1)(e) of the ESA defines “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned.” That is a very high standard — and any clause that implies a lower threshold contaminates the entire termination structure.

Before vs After Waksdale — Real Dollar Impact

Scenario	Contract with Waksdale Problem	Compliant Contract
3-year employee dismissed without cause	Common-law notice (up to 12–18 months’ pay)	ESA: 3 weeks’ notice or pay in lieu
Litigation risk	Very high; employee likely wins	Low; contract cap enforceable
Pre-2021 contracts	Extremely high risk — redraft immediately	N/A

How to Draft a Waksdale-Proof Termination Clause

1. Just cause clause: Reference ESA Section 1(1)(e) wilful misconduct standard explicitly; do not use “serious misconduct” alone
2. Without cause clause: State clearly that termination will provide notice/pay in lieu equal to or greater than ESA minimums
3. Independence: Keep just cause and without cause clauses structurally separate — no cross-references
4. Re-execution: Contracts drafted after October 25, 2021, or re-executed with fresh consideration (raise, bonus, promotion) will be evaluated under current law

3. Ontario Non-Compete Ban — Effective October 25, 2021

The Working for Workers Act (2021) made non-competition agreements void and unenforceable for virtually all Ontario employees from October 25, 2021.

Category	Result	Notes
Non-compete agreements — most employees (after Oct 25, 2021)	VOID	Applies to all non-executive employees
C-suite executives (CEO, COO, CFO, CLO, CIO, CHRO, President)	Permitted if reasonable	Still subject to common-law reasonableness test
Vendor-becomes-employee in business sale (M&A)	Permitted if reasonable	Transaction-context exception
Non-solicitation clauses (clients + employees)	Fully valid	Reasonable time/scope restrictions enforceable

Replacement strategy: Replace any non-compete clause with: (1) non-solicitation of clients (12–24 months reasonable); (2) non-solicitation of employees (12 months); and (3) confidentiality/trade secrets (indefinite). All three remain fully enforceable in Ontario.

4. Quebec Employment Contracts: French-First Requirement + Bill 96

French Language Obligation

• Employment offers and contracts must be provided first in French
• Employees may only request a version in another language after reviewing the French version
• Bilingual contracts are acceptable, but French must be presented first and govern in case of conflict
• Providing only an English contract = employee can challenge validity or seek rescission

25–49 Employee Threshold — Bill 96 (June 1, 2025)

Previously, only employers with 50+ employees in Quebec were required to register with the OQLF and implement a francization program. Since June 1, 2025, businesses with 25–49 Quebec employees must:

1. Register with the OQLF
2. Conduct a language use analysis
3. Develop a francization committee or program if required

5. The 12 Must-Have Employment Contract Clauses

#	Clause	Key Drafting Notes
1	Position and duties	Don’t over-specify — retain reasonable flexibility to adjust duties
2	Compensation and benefits	State base salary, pay cycle, bonus formula (with discretion language if variable)
3	Probation period	ON/QC/BC/AB: max 3 months; must be expressly written — silence = common-law notice from day one
4	Hours and work location	Include remote work arrangements; specify governing province for remote workers
5	Without cause termination	Must equal or exceed ESA minimums; Ontario: must pass Waksdale review
6	Just cause termination	Must align with ESA wilful misconduct standard (s.1(1)(e)); no lower threshold
7	Resignation notice	Can require 2–4 weeks written notice; not always enforceable but creates contractual record
8	Confidentiality	Trade secrets, client lists, pricing; reasonable scope; no time limit needed — indefinite is valid
9	IP ownership	All work product created in scope of employment belongs to employer; list source code, designs, inventions
10	Non-solicitation (replacing non-compete)	Ontario: use non-solicitation only; clients + employees; 12–24 months reasonable period
11	Governing law and jurisdiction	Specify the province; for remote workers, choose the province where work is performed
12	Independent legal advice acknowledgment	Recommend employee consult a lawyer before signing — reduces “I didn’t understand” claims

6. Probation Period Rules — Provincial Comparison

Province	Max Probation	Dismissal During Probation	Key Note
Ontario	3 months	No notice required (if written clause)	Must be expressly stated in writing
Quebec	3 months	No notice required (LSA protections kick in after 3 months)	LSA Art. 124 protection begins after 2 years of service
BC	3 months	No ESA notice required (if written clause)	Must be confirmed in writing; exceeding 3 months = regular employment
Alberta	90 days	No notice required (ESC Section 54 exemption)	Contract must expressly state probationary terms

Critical reminder: Without a written probation clause, courts will typically find that the employee was entitled to common-law reasonable notice from day one — even for a two-week employee. Written terms are the only protection.

7. Prohibited Clause Quick Reference

Prohibited Content	ON	QC	BC	AB
Wage below ESA minimum	❌ Void	❌ Void	❌ Void	❌ Void
Non-compete (most employees)	❌ Void (Oct 2021+)	⚠️ Must be reasonable	⚠️ Must be reasonable	⚠️ Must be reasonable
Waiver of vacation pay	❌ Void	❌ Void	❌ Void	❌ Void
Termination pay below ESA	❌ Void	❌ Void	❌ Void	❌ Void
English-only contract (QC employees)	N/A	❌ Invalid without French version first	N/A	N/A

8. Q&A — Common Employer Scenarios

Q1: I have a 2019 Ontario employment contract. How much risk am I facing if I need to dismiss?

A: Very high. Virtually all 2019 contracts contain just cause language that fails the Waksdale test. Before any dismissal, get a lawyer to review the contract. The cost of a 1–2 hour legal review ($300–$600) is a fraction of the potential common-law severance exposure (often 1 month per year of service, sometimes more).

Q2: My Quebec employee only speaks English. Can I just give him an English contract?

A: No — you must present the French version first. Practically, you can provide a bilingual contract (French on the left, English on the right), with a note that the French governs in case of conflict and that the employee has read the French version. Keep a signed acknowledgment on file.

Q3: I never gave a written contract. My employee has been here 4 years. What’s my exposure if I terminate?

A: Without a written contract cap, you owe common-law reasonable notice in addition to ESA minimums. For a 4-year Ontario employee, common-law notice could be 4–6 months. Negotiate a separation with a formal release agreement signed by the employee to limit future liability.

Q4: Can I include a clause saying “company policies override the employment contract”?

A: Dangerous drafting. If company policies lower ESA minimums, those provisions are void. Safer language: “Employee agrees to comply with company policies as may be updated from time to time, provided such policies do not reduce rights guaranteed by applicable employment standards legislation.”

9. Compliance Checklist

• ☐ Audit all pre-2021 Ontario employment contracts for Waksdale risk
• ☐ Verify just cause and without cause clauses are structurally independent
• ☐ Remove or replace all non-compete clauses (Ontario non-executive employees)
• ☐ Add reasonable non-solicitation clauses (clients + employees, 12–24 months)
• ☐ Include written probation clause with clear duration (max 3 months)
• ☐ Quebec contracts: provide French version first; keep employee acknowledgment on file
• ☐ IP ownership clause covers all work product categories
• ☐ Governing law clause specifies the correct province

Sources: Waksdale v Swegon North America Inc, 2020 ONCA 391 · Ontario ESA 2000 s.1(1)(e) · Working for Workers Act, 2021 (Bill 27) · Quebec Charter of the French Language as amended by Bill 96 · BC Employment Standards Act · Alberta Employment Standards Code · OQLF francization threshold updates effective June 1, 2025