That Termination Clause in Your Employment Contracts May Not Hold Up

Employers

Aug 4

Employment contract lessons from the Ghazvini v CIBC case

Most employees never read the termination clause in their contract closely. But a 2025 Ontario Superior Court decision is a reminder that HR teams should be reading theirs very closely, because a poorly drafted clause can collapse entirely, exposing the organization to far greater liability than intended.

The Case

In Ghazvini et al v Canadian Imperial Bank of Commerce, 2025 ONSC 5218, two CIBC employees (Mobile Investment Consultants Kourosh Ghazvini, 38, with 4.5 years of service, and Sandra Rose, 54, with 5.5 years of service) were terminated without cause in a September 2022 restructuring, effective October 7, 2022. CIBC paid statutory minimums under the Canada Labour Code, RSC 1985, c L-2 (CLC). The court had to decide whether the contract's termination clause was enforceable, and if not, what the employees were owed at common law.

The Termination Clause

Both employees had signed the same CIBC employment agreement, which contained three relevant provisions:

The for-cause provision allowed CIBC to terminate without notice or pay for a broad list of reasons, including dishonesty, fraud, breach of trust, failure to perform duties satisfactorily, and breach of any term or condition of employment. The list was expressly non-exhaustive: it stated that "cause includes, but is not limited to" the items listed.

The without-cause provision provided for two weeks' notice per completed year of service, subject to a minimum of three weeks and a maximum of 18 months, but only if the employee signed a full and final release. It also allowed termination "at any time" without cause.

The saving provision stated that if any part of the termination provision failed to meet statutory minimums, the statutory minimums would apply instead.

Why the Termination Clause Failed

All three parts failed together, and the reasoning is worth understanding in detail.

1. The for-cause list was overbroad. The court found the provision violated the CLC because it defined "cause" more broadly than the legal standard of "just cause" under the Code. Just cause requires serious misconduct, and even then, context matters. The Supreme Court confirmed in Mckinley v BC Tel, 2001 SCC 38 that even dishonesty doesn't automatically justify dismissal; the employer's response must be proportional to the misconduct.

CIBC's clause, by contrast, listed "dishonesty" as a standalone trigger for termination without notice or pay, alongside items like "failure to perform your duties in a satisfactory manner." None of those things necessarily amount to just cause under the CLC, depending on the circumstances.

Justice Merritt found that an employee reading this clause would not know with certainty when CIBC could lawfully terminate without notice, and might simply accept a for-cause termination they had grounds to challenge, never knowing they had rights under the CLC.

2. One bad clause sank the whole provision. This is where the 2020 Ontario Court of Appeal decision in Waksdale v Swegon North America Inc., 2020 ONCA 391 becomes critical. Before Waksdale, courts sometimes assessed each part of a termination provision in isolation; a flawed for-cause section would not necessarily bring down an otherwise valid without-cause section. Waksdale changed that.

Termination provisions are now read as a whole, and if any part violates employment standards legislation, the entire provision is unenforceable, regardless of whether the employer actually relied on the problematic part. Because the for-cause language was invalid, the without-cause language went down with it.

3. The saving clause didn't help. Courts have consistently refused to let saving clauses rescue non-compliant drafting. The policy rationale is straightforward: if employers could escape the consequences of an illegal clause simply by adding a saving provision, they would have no incentive to draft compliant contracts in the first place.

The Result

With the clause struck down, both employees were entitled to reasonable notice at common law, assessed using the usual Bardal factors from the landmark 1960 Canadian court decision Bardal v Globe & Mail Ltd.: age, length of service, character of employment, and availability of comparable alternate employment. Several things pushed the notice periods up: their sales roles required building a client book they couldn't take with them due to restrictive covenants, CIBC's mass restructuring flooded the job market with hundreds of similarly qualified candidates, and their role had no real equivalent elsewhere in the industry.

Mr. Ghazvini (38 years old, 4.5 years of service): 7 months' notice
Ms. Rose (54 years old, 5.5 years of service): 12 months' notice

Damages were calculated on annualized 2022 compensation ($110,000 and $117,000 respectively, including commissions) plus 10% for lost benefits. The court rejected CIBC's push for a three-year average, since both incomes were trending upward and an average would have significantly undercompensated them.

Because both were let go just 3.5 weeks before fiscal year-end, they were also awarded their 2022 bonuses ($62,376.16 and $99,663), as the court found they would likely have hit "Exceeded Goals" ratings based on consistent manager feedback, performance awards, and strong sales volumes throughout the year.

On mitigation, the specifics matter. Ghazvini was offered a financial advisor role at TD Bank for roughly $60,000 with no commissions, a significant step down from his CIBC compensation. Rose declined commission-only roles at RBC and Primerica. The court found neither employee had failed to mitigate: it is not unreasonable for a dismissed employee to hold out for comparable work rather than accept the first available position at a substantially reduced income.

What This Means for Your Organization

Audit your "for cause" language against your standard templates. Non-exhaustive lists that sweep more broadly than the legal just-cause standard are a common and costly drafting problem, and CIBC is far from alone in using one. After Waksdale, that overbreadth can void your entire termination clause, not just the offending line, even if you never intend to rely on it.

Know if you're federally regulated. Banking, telecom, and interprovincial transportation employers operate under the CLC, whose just-cause standard can be tougher to meet than Ontario's ESA "wilful misconduct" standard. If that's you, your termination clauses need extra scrutiny, and your employees may have more robust rights than their provincially regulated counterparts.

Don't rely on saving clauses. They are not a substitute for compliant drafting, and courts will not treat them as one.

Account for variable pay properly. If your commission-based employees have upward-trending income, be prepared for damages calculations to reflect that trajectory rather than a flattened historical average.

Expect mitigation disputes to turn on reasonableness, not speed. An employee who turns down a lower-paying or commission-only role isn't automatically failing to mitigate. Courts look at whether the alternative was genuinely comparable.

The takeaway: an outdated or overbroad termination clause isn't just a technical drafting issue. It can turn a limited statutory payout into months of common law notice, bonus entitlements, and benefits. Now is a good time to have counsel review your standard templates before your organization becomes the next cautionary tale.

Sancia Pinto is a partner at Pinto Shekib LLP and a civil litigator with a practice focused on employment disputes, commercial litigation, and estates matters.

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