Federal Employers Beware – Court Invalidates Termination Clause!

Ghazvini v. CIBC Applies Waksdale to Federal Termination Clauses: For federal employers, the financial exposure of an invalid termination clause is significant and directly affects termination planning, workforce restructuring, and contract modernization strategies

A recent Ontario Superior Court decision has delivered a significant reminder to federally regulated employers – termination clauses in employment contracts must be carefully drafted and fully compliant with the Canada Labour Code (CLC). Courts are now applying the same strict scrutiny to CLC termination provisions that Ontario employers have faced under the Employment Standards Act, 2000 (ESA) since the Court of Appeal’s decision in Waksdale v. Swegon North America Inc.

In Ghazvini et al. v. Canadian Imperial Bank of Commerce, 2025 ONSC 5218, the Court held that termination provisions in CIBC’s standard employment agreements were unenforceable. As a result, two terminated employees were entitled to common law reasonable notice, despite the contracts purporting to limit termination entitlements to statutory minimums under the CLC.

This is a major development for federally regulated employers who may have assumed Waksdale only affected provincially regulated workplaces.

This decision has wide-reaching implications for banks, telecommunications companies, transportation businesses, and other federally regulated employers.

What Happened in Ghazvini?

The plaintiffs were Mobile Investment Consultants employed by CIBC. Their employment was terminated without cause as part of a restructuring. CIBC paid them their minimum entitlements under the Canada Labour Code and relied on termination provisions in their employment contracts that limited notice to statutory minimums.

The employees challenged the enforceability of those termination clauses and argued they were entitled to reasonable notice at common law.

The Court agreed with the employees.

Why the Termination Clauses Failed

The Court found that the termination provisions, when read as a whole, violated the minimum standards under the Canada Labour Code and were therefore unenforceable. Several key problems stood out:

The “For Cause” provision was too broad
The contract listed examples of “cause” that could trigger termination without notice. The Court found that many of these examples could fall short of “just cause” under the Canada Labour Code, which requires serious misconduct or properly established progressive discipline. Because the clause potentially allowed termination without notice in situations where the CLC would still require notice, it was invalid.
Waksdale applies to CLC contracts
The Court applied the principles from Waksdale v. Swegon North America Inc., 2020 ONCA 391. Under Waksdale, if any part of a termination clause is illegal, the entire termination regime fails. It does not matter that the employer did not rely on the illegal portion. Enforceability is assessed at the time the contract is signed, not at termination.
“Saving” clauses will not fix illegal drafting
CIBC’s contract included a saving provision stating that statutory minimums would apply if the termination clauses did not comply with legislation. The Court rejected this as ineffective, confirming that saving clauses cannot rescue termination provisions that are non-compliant from the outset.
The phrase “at any time” remains legally risky
Although the Court did not ultimately need to decide this issue, it expressed concern about contract language stating that employees could be terminated “at any time.” Under the Canada Labour Code, employees have additional protections against unjust dismissal, and language suggesting termination can occur “at any time” risks misleading employees about their rights.

Why This Case Matters for Employers

This decision reinforces that:

Federally regulated employers are now firmly subject to Waksdale-level scrutiny.
Termination provisions must be compliant in their entirety, including for-cause language.
Overly broad or ambiguous definitions of “cause” can invalidate an entire termination clause.
Boilerplate saving clauses offer little protection if the underlying clause is defective.

For employers, the financial exposure is significant. In Ghazvini, the Court awarded one employee seven months’ notice and the other twelve months’ notice, including compensation for salary, commissions, bonuses, and benefits.

This risk is not theoretical. It directly affects termination planning, workforce restructuring, and contract modernization strategies.

Practical Takeaways for Employers

Employers should treat this decision as a prompt to review and update their employment agreements. In particular:

For-cause termination language must align tightly with the “just cause” standard under the Canada Labour Code.
Termination clauses must be compliant as a whole, not just in the without-cause section.
Contracts drafted before Waksdale may no longer be enforceable.
Federal employers should not assume their termination language is “safe” simply because it references statutory minimums.

How Minken Employment Lawyers Can Help

At Minken Employment Lawyers (Est. 1990), we regularly advise employers and employees on:

Drafting and updating enforceable termination clauses
Conducting employment contract audits for ESA and CLC compliance
Managing restructuring and termination risk
Wrongful dismissal and unjust dismissal claims

If your organization operates in a federally regulated sector or has not reviewed its employment agreements since Waksdale, now is the time to act.

Contact Minken Employment Lawyers (Est. 1990) to ensure your termination clauses withstand legal scrutiny. Visit www.minkenemploymentlawyers.com or call 905-477-7011 or email at contact@minken.com to book a consultation.

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Please note that this article is for informational purposes only and does not constitute legal advice.