Ontario Employment Contracts: The Risks That Start Before the Offer Letter

You were trying to close a candidate. The role had been open for three months, the finalist was good, and you wanted to bring them on board. So you told them the position had strong growth potential, that the organization was financially stable, and that this was the kind of opportunity that rewarded long-term commitment. The offer letter followed a few days later, covering the title, the start date, the salary, and the standard terms.

Two years in, you need to restructure. The role is eliminated. You terminate the employment and pay out the ESA minimums under the offer letter’s termination clause. What you said at the interview, and what the hiring manager said over three conversations with the candidate, may now be legally relevant. Depending on how those representations are characterized, you may have obligations that no one in your organization knew you were creating.

The Employment Contract Is Not Just the Document

Ontario courts treat employment as a contractual relationship, and the contract includes more than the written offer letter. Representations made during the hiring process, about job security, about the nature of the role, about the organization’s trajectory, can be incorporated into the employment agreement or form the basis of a separate misrepresentation claim, depending on the circumstances and how material the representation was to the candidate’s decision to accept the offer.

The most common scenario involves a candidate who left a secure position to join a new organization, relying on representations about stability or long-term opportunity, and who is then terminated within a relatively short period. Courts have awarded extended notice periods, or found inducement that justified departing from the standard reasonable notice calculation, where the employer made specific representations to lure the employee away from an existing position that the employee reasonably relied on.

The written offer letter that says nothing about the role’s stability does not insulate the employer from what the hiring manager said in the final interview. It just means there is a factual dispute about what was said, which is resolved by a judge rather than a document.

What Probationary Periods Actually Do

Most employment offer letters include a probationary period. The standard language says something to the effect that the first three months of employment are probationary, and that the employer may terminate during that period with limited or no notice if the employee is not suitable for the role. The probationary period gives the employer less protection than it appears to.

Under Ontario’s Employment Standards Act, an employee who has worked for less than three months has no entitlement to notice or pay in lieu. That much is accurate. But the ESA sets minimum standards, not maximum ones, and courts have held that an employer who terminates a probationary employee in bad faith, in circumstances that amount to unfair dealing rather than a genuine assessment of suitability, may owe damages at common law even within the probationary window.

More importantly, an employee who was specifically induced to leave another position, or who was given representations that a reasonable person would understand as a commitment to a longer relationship, may be able to claim damages that exceed the statutory minimum even if the termination falls within the stated probationary period. The probationary clause is not a release. It is a signal of the parties’ intention, which courts consider alongside everything else.

The Template Problem

Most Ontario employers use some version of an employment offer letter template. The template was drafted at some point by someone, an HR professional, an external advisor, or a manager who modeled it on a document found elsewhere, and has been used since with modifications to the name, title, salary, and start date on each new hire.

Ontario courts have been systematically voiding termination clauses that violate the Employment Standards Act. Clauses that were reviewed and considered compliant years ago have been successfully challenged, including after Waksdale v. Swegon North America Inc., 2020 ONCA 391, which confirmed that a void for-cause provision can invalidate the entire termination clause, including the without-cause cap. An employer who has been using the same template for a decade is likely carrying a termination clause problem across their entire workforce.

Beyond the termination clause, templates frequently omit terms that employers later wish they had included: a mobility clause, an explicit description of bonus terms and conditions, a properly drafted probationary period, and confidentiality provisions appropriate for the role. The cost of getting the agreement right at the time of hire is minimal. The cost of litigating what the employment agreement actually means after a termination is not.

The Honest Assessment

The hiring stage is the moment when employers have the most leverage to define the employment relationship on terms that protect the organization. It is also the moment when, in practice, the least legal rigour is applied. Employers trying to close a candidate do not think about what representations are being made or how the offer letter will read to a court three years later.

That asymmetry, maximum exposure at the stage of least legal attention, is where a significant portion of Ontario employment litigation originates. A properly drafted employment agreement, signed before the first day of work, with clear terms on compensation, role, location, termination entitlements, and probation, eliminates most of the disputes that arise later.

The time to get it right is at the offer stage. Getting it right after the fact, for existing employees whose agreements have problems, is harder, but the exposure from not doing it is the same.