An employment contract in Ontario can affect far more than your salary and vacation. It can limit your severance, change your bonus rights, restrict future employment and determine what happens if you lose your job.

But signing a contract doesn’t automatically make every clause enforceable. Ontario employment law protects employees from agreements that violate minimum employment standards, and some contractual restrictions can be challenged.

Whether you’re starting a new job, being asked to sign an updated agreement or have already been fired, understanding your contract can protect thousands of dollars in compensation.

💡 The key point: A valid employment contract can limit your severance to Ontario’s minimum standards. An unenforceable termination clause can leave you entitled to much more, potentially as much as 24 months’ pay. Before you sign, always check first.

If your employer fires you without alleging misconduct, your contract can play a major role in determining your compensation. See our guide to termination without cause in Ontario to understand your rights.

On This Page

What Is an Employment Contract in Ontario?

An employment contract is an agreement between an employee and employer that sets out the terms of their working relationship.

It can be written, verbal or implied through what the employer and employee agree to and do. You don’t necessarily need a signed document to have an employment contract.

Contracts commonly cover salary, job duties, bonuses, vacation, probation, confidentiality and what happens when employment ends.

Your contract can’t take away minimum rights under Ontario’s Employment Standards Act (ESA). However, a legally enforceable contract can limit certain additional rights you would otherwise have under common law, particularly severance.

Employment contract rules differ across Canada. For a broader overview, see our guide to employment contracts in Canada.

What Should You Check Before Signing an Employment Contract?

Don’t focus only on your starting salary. Some of the most expensive contract provisions won’t affect you until months or years later.

  • Termination and severance: Does the agreement limit you to ESA minimums if you’re fired?
  • Salary, bonuses and commissions: When are they earned and paid? What happens if you leave or lose your job?
  • Probation: Does the employer have the right to assess your suitability during a stated probation period?
  • Job duties and location: Can your employer change your position, responsibilities, pay or workplace?
  • Fixed-term employment: Is the job guaranteed until a particular date? Can the employer end it early?
  • Non-compete and non-solicitation restrictions: What can you do after leaving?
  • Temporary layoffs: Does the contract give your employer the right to temporarily stop providing work?

Also check whether the agreement incorporates a separate handbook, compensation plan or policy that you haven’t received.

Before signing a new job offer, have the complete agreement reviewed. A contract that’s acceptable today can become very costly if your employment ends unexpectedly.

Can an Employment Contract Limit Your Severance in Ontario?

Yes. A valid termination clause can limit what your employer owes when it fires you without cause.

Without an enforceable contractual limit, employees can be entitled to common-law reasonable notice or severance based on factors including age, length of service, position and prospects of finding similar work. Compensation can reach 24 months’ pay. Learn more about severance pay in Ontario.

A valid contract can replace that potentially larger entitlement with a smaller amount, provided the agreement complies with Ontario law.

When is a termination clause unenforceable?

A termination clause can fail when it provides less than Ontario’s mandatory minimum employment standards or improperly limits statutory rights.

Problems can include provisions that:

  • Improperly remove termination pay or statutory severance pay.
  • Fail to preserve required benefits during the statutory notice period.
  • Allow termination for cause without preserving minimum ESA entitlements where those entitlements are still required.
  • Contain conflicting or legally defective termination provisions.

Courts assess the termination provisions together. Under Ontario’s Waksdale principle, a defective for-cause provision can invalidate the broader termination scheme, even when an employee was actually fired without cause.

A contract also can’t automatically eliminate your minimum termination rights simply because your employer alleges misconduct. Learn more about termination for cause in Ontario and when severance may still be owed.

Read our detailed guide to enforceable termination clauses in Ontario.

⚠️ Already fired? Don’t accept your employer’s severance calculation simply because it refers to a signed contract. Have the agreement and severance package reviewed before accepting an offer or signing a release.

Important Employment Contract Clauses in Ontario

Probation periods

Ontario employees aren’t automatically on probation. A probation period must be properly established in the employment agreement.

Even during probation, employers must respect applicable minimum employment standards and human-rights protections. A probation clause can affect your dismissal rights, so its wording matters.

See probation period rights in Ontario.

Non-compete and non-solicitation clauses

Ontario prohibits most new non-compete agreements with employees entered into on or after October 25, 2021. Exceptions apply to certain executives and business-sale situations. Earlier agreements require a separate enforceability analysis.

Non-solicitation clauses are different. They can restrict efforts to take clients or employees from a former employer, but must still be legally enforceable.

Learn more about non-compete clauses in Ontario and non-solicitation restrictions.

Fixed-term employment contracts

A fixed-term contract ends on a specified date or after a defined period.

If your employer ends it early without an enforceable early termination provision, you could be owed compensation for the remaining contract period. That can be worth substantially more than ordinary statutory termination pay.

See our guide to early termination of fixed-term contracts.

Bonuses, commissions and other compensation

Your employment contract can affect when bonuses and commissions are earned, paid or lost after termination.

Don’t assume wording such as “must be actively employed” automatically eliminates all bonus rights during a notice period. The complete compensation plan and applicable law matter.

Repayment provisions also deserve attention. An employer can’t automatically turn every advance or commission draw into a personal debt.

Learn more about bonus pay in Ontario.

Layoffs and changes to your job

A contract may address whether an employer can change your duties, reduce your pay, transfer you to another location or temporarily lay you off.

But not every proposed change is enforceable. A major unilateral change can amount to constructive dismissal, while an unauthorized temporary layoff in Ontario can create a severance claim.

Don’t resign or agree to major changes before understanding your options.

Independent contractor agreements

Calling someone an independent contractor doesn’t necessarily make them one. Ontario courts examine the actual working relationship, not simply the label in the agreement.

A worker who depends heavily on one company can have rights as a dependent contractor, including reasonable notice when the relationship ends.

Can Your Employer Make You Sign a New Employment Contract?

You don’t have to sign immediately because your employer presents a new agreement. A replacement contract can introduce restrictions that weren’t part of your original employment terms.

For example, an employer might ask a long-service employee to sign a new termination clause limiting future severance to ESA minimums.

New contractual restrictions introduced after employment begins can raise questions about fresh consideration—something of value provided in exchange for the new agreement. Employers may also have options to make lawful changes on proper notice. Whether a new contract is enforceable depends on the circumstances.

If you’re being asked to sign, request a copy to review before deciding. Refusing a proposed contract can have consequences, so get advice rather than resigning or assuming the change is automatically invalid.

What if you’ve already signed?

You may still be able to challenge certain terms. A signature doesn’t cure a clause that violates Ontario employment law.

Keep copies of the original contract, later amendments, offer letters and compensation plans. Those documents can determine which terms apply and what your employer actually owes.

Ontario Employment Contract Court Wins: Our Results

Samfiru Tumarkin LLP has successfully challenged employment contracts and defended employees’ contractual rights in Ontario courts. These cases show how a few words—or a promise made during hiring—can change the outcome.

Dufault v. Ignace — $157,071.57 awarded

Our firm represented Karen Dufault after her Ontario employer ended a fixed-term contract early and offered only two weeks’ termination pay. The court found the termination provisions unenforceable and awarded $157,071.57 for the remaining contract period.

The Ontario Court of Appeal upheld the result in December 2024, and the Supreme Court of Canada declined to hear a further appeal in June 2025. Read the Dufault case.

Alarashi v. Big Brothers Big Sisters of Toronto — Additional severance awarded

Our team challenged a contract that referred to termination pay “or” severance pay, even though qualifying employees can be owed both statutory payments. The court found the clause unenforceable and awarded our client $9,033.44 in additional compensation, plus $8,000 in legal costs. Read the Alarashi case.

Ballim v. Bausch & Lomb — Compensation for the remaining contract

Our team used a hiring email to establish that our client had been promised a one-year contract. After she was dismissed about three months into the job, the court awarded compensation for the remaining 38.5 weeks. Read the Ballim case.

Carpenter v. Brains II — Eight months of severance

Our team successfully challenged a termination clause that failed to preserve required benefit continuation. The court found the clause unenforceable and determined that our client was entitled to eight months of reasonable notice, with legal costs awarded separately. Read the Carpenter case.

2250898 Ontario Inc. v. Pepe — Nearly $33,000 repayment demand defeated

In August 2026, our team won an Ontario Divisional Court appeal for an employee whose former employer demanded repayment of $32,983.08 in commission draws. The court overturned the repayment judgment and dismissed the employer’s claim. The contract hadn’t established the repayment obligation the employer alleged. Read the Pepe case.

These results aren’t guarantees of what every employee will receive. They demonstrate why the actual wording of an employment agreement matters—and why an employer’s interpretation isn’t always the final answer.

Employment Contract Ontario FAQs

Are employment contracts legally binding in Ontario?

Yes. Employment contracts can be legally binding, but provisions that violate minimum employment standards or fail other enforceability requirements can be challenged. Signing doesn’t automatically make every clause valid.

Does an employment contract have to be in writing?

No. Employment terms can be established through verbal agreements, written documents and implied terms. Some legal obligations and required written information are subject to separate rules, so a written agreement remains important evidence of what was promised.

Can I negotiate an employment contract before signing?

Yes. Salary, bonuses, vacation, termination provisions, non-solicitation restrictions and other terms may be negotiable. The best time to identify a problematic clause is before you accept it.

Can my contract limit me to ESA minimum severance?

Yes, if the termination provisions are enforceable. If the limitation fails, you may instead be entitled to common-law reasonable notice worth substantially more.

Can I use a standard Ontario employment contract template?

A template can help explain common terms, but it doesn’t guarantee that an agreement fits your circumstances or complies with current Ontario law. Employees should review any proposed contract before signing, particularly its termination and compensation clauses.

Can my employer change my contract after I’ve signed?

Not every change can be imposed unilaterally. Major changes to pay, duties or other fundamental terms can trigger legal rights. Whether a change is permitted depends on the existing agreement, your consent, any notice provided and the circumstances.

What happens if I signed a bad employment contract?

You may still have legal options. A clause that violates Ontario employment law doesn’t become enforceable simply because you signed it. Have the agreement reviewed before accepting an employer’s demands or severance offer.

Have Your Ontario Employment Contract Reviewed Before You Sign

A contract can protect your career—or cost you significant compensation if the relationship ends.

The Ontario employment lawyers at Samfiru Tumarkin LLP review employment agreements, identify restrictive clauses and help employees understand what they’re agreeing to.

If you’ve already been terminated, we’ll assess your contract alongside your severance offer to determine what you’re owed.

Request an Employment Contract Review

Already lost your job? Have your severance package reviewed before signing.

Before you sign, always check first.

Unionized employees must ontact their union about contract and workplace disputes. Our employment law team represents non-unionized employees.

Get Advice Before You Sign an Employment Contract

Employment contracts in Ontario can limit your severance and legal rights in ways that aren’t always obvious.

Request Contract Review