A standard employment contract template, last revised 4 years ago by a business consultant who was not a lawyer, sits in the shared drive of a small manufacturing business operating in southwestern Ontario. The owner-operator created the template when the company employed only 3 people, adapting language from a sample contract found online and adding provisions that seemed to protect the business's interests. That template has since been used for every hire the company has made, and the workforce has grown to 14 employees across production, administrative, and supervisory roles.
The contract contains a termination clause drafted to limit the company's obligations upon dismissal without cause. The relevant provision states that employees are entitled to receive only the minimum notice or pay in lieu required by applicable legislation, with no additional common law notice or severance. The clause does not reference specific statutory provisions or account for how entitlements might change as employees accumulate service. The same template includes a 90-day probationary period during which, according to the contract's language, either party may end the relationship without notice or compensation. That provision has never been tested, but 2 employees hired within the past 8 months are currently within or have recently completed their stated probationary periods.
The company also employs a production supervisor under a fixed-term contract originally set for 18 months. That contract has been renewed twice, each time for an additional 12-month term, using the same template with only the dates changed. The supervisor is now 7 months into the 3rd consecutive term. The fixed-term contract includes the same termination clause as the indefinite-hire template, and the supervisor has come to expect continued renewals based on conversations with the owner about long-term production planning.
The owner recently received notice from an employment lawyer retained by a former employee who was dismissed without cause after 26 months of service. The employee had been offered 2 weeks of pay in lieu of notice, consistent with the termination clause and the provincial employment standards minimum for that length of service. The demand letter asserts that the termination clause is unenforceable and claims the employee is entitled to substantially greater compensation at common law. The owner has asked legal counsel to review not only that specific dispute but the entire employment contract template that the company has been using, raising questions about whether the termination provisions, probationary language, and fixed-term arrangements can withstand scrutiny and what exposure the company faces across its current workforce.