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What Mississauga businesses owners need to know about termination clauses in employment contracts?


When a business hires a new employee, everyone hopes it will be a long and fulfilling relationship. However, in some cases, the employee is not the right fit for the organization, doesn’t fulfill job responsibilities, or performs actions that are simply incompatible with remaining in the job. For these reasons, it is important for employers to have termination clauses in their employment contracts. Gary Bennett of GAB Law Firm in Mississauga helps his clients create contracts that protect their businesses while being honest and transparent to manage employee expectations.

What are termination clauses?

A termination clause is an agreement between the employer and the employee which explains how much salary and benefits the employee will receive when the employment contract is terminated. Termination clauses must be drafted carefully and according to very specific guidelines in order for them to be upheld by a judge in a court of law.

Why do businesses use termination clauses?

Employers use termination clauses to limit the amount of money they must pay when terminating employees. They also rely on termination clauses when providing employees with certainty and clarity about the compensation they will receive in advance of their employment being terminated. Without a termination clause, employer’s are often penalized and held liable to pay employees the maximum amount of compensation when the employee’s employment is terminated.

However, employers must follow the law when drafting termination clauses. Courts will not enforce a termination clause unless the employee is provided with the minimum entitlements prescribed by the provincial or federal employment standards. Even if an employee has voluntarily signed a contract and agreed to the terms a court has the power to compel an employer to provide more compensation to the employee to ensure that the employee receives the minimum entitlements prescribed by law. Due to recent changes in the law, every employer should have their termination clauses reviewed by an experienced employment lawyer to ensure that they are enforceable and protect the business.

For more information about termination clauses or other human resources matters, call Gary Bennett at (365) 800-2090. Gary represents many employees and employers, affording him insight into the needs of all his clients.

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