Chan v. NYX Capital Corp., 2025 ONSC 4561
In a recent case before the Ontario Superior Court, an employee had been terminated under a probationary clause of a contract. However, the court ruled that the probationary clause itself was also a disguised termination clause, and one which breached the Employment Standards Act (“ESA”). In particular, the clause purported to allow the employer to terminate the worker’s employment at any time and for any reason within the first three months of employment. Building on the recent rulings of the Court in both Dufault v. the Corporation of the Township of Ignace and Baker v. Van Dolder’s Home Team Inc., the Court ruled that such language breaches the ESA. Specifically, the purported ability to terminate at any time and for any reason would offend the ESA’s anti-reprisal provisions.
While the Employer attempted to rely on this provision to terminate the employee during the stipulated probationary period, because the termination clause itself purported to contract out of the ESA, it was held to be unenforceable.
In addition, the Court also found that the termination clause violated the ESA in numerous other ways. Notably, the termination clause purported to release the employer from any claims arising from the termination of employment except in respect to certain minimum entitlements under the ESA. The Court ultimately ruled that this section of the termination provision was likewise unenforceable. This was done on the basis that certain claims arising from the termination of employment may not be contracted out of. In particular, if an employee was terminated in reprisal for attempting to exercise a right under the ESA, they could claim damages as a separate form of remedy to those which the termination clause specified. By limiting the type of claims that the employee could potentially make, the termination clause again attempted to contract out of the ESA.
Probationary Status
In addition to the Court’s determination that the probationary clause was unenforceable, the Court also provided an analysis of the principles applicable to probationary employees. The Court referred to the leading Ontario Court of Appeal case Nagribianko v. Select Wine Merchants Ltd., which sets out the test for terminating probationary employees without notice. For an employer to terminate a purportedly probationary employee without notice, they must:
- Make a good faith determination that the employee is unsuitable for permanent employment; and
- Provide the probationary employee with a fair and reasonable opportunity to demonstrate their suitability for permanent employment.
Some matters relevant to the suitability of permanent employment can include considerations of the employee’s character, ability to work with others, and ability to meet the employer’s present and future standards.
Separately, the Court noted that s. 54 of the ESA provides that no employer shall terminate an employee who has worked for three months is entitled to reasonable notice. Such a provision does not displace the common law obligation of reasonable notice for employees who have not yet worked three months. Given the unenforceability of the termination clause as mentioned above, the employee was entitled to reasonable notice at common law. Furthermore, since the probation clause itself was unenforceable, it could not be determined that there was any intention to establish the employee as a probationary employee.