Ontario Court of Appeal: Ghazvini v CIBC Termination Clause Unenforceable

• The Ontario Court of Appeal upheld a damages award against CIBC for using termination clauses that violated the Canada Labour Code.
• The court applied the Waksdale principle, ruling that any defect in a termination provision, even partial, renders the entire clause unenforceable.
• CIBC's contractual definition of "cause" was found to be broader than the statutory "just cause" standard, invalidating the clause.
• As a result, the former employees were entitled to common law reasonable notice damages, not just minimum statutory entitlements.
• The court also affirmed the inclusion of variable incentive pay and annual bonuses in the damages calculation.

Any deviation from statutory minimums, even in a severable part of a termination clause, risks invalidating the entire provision and exposing the employer to substantial common law liabilities.

The Ontario Court of Appeal recently affirmed a significant judgment against the Canadian Imperial Bank of Commerce (CIBC), dismissing the bank's appeal in the case of Ghazvini v. Canadian Imperial Bank of Commerce, 2026 ONCA 766. This decision upholds a prior Superior Court ruling that awarded damages to three former employees, finding that their employment contracts contained termination provisions that failed to comply with the Canada Labour Code (CLC). The employees had been terminated without cause, and the lower court determined they were entitled to damages rather than the limited common-law reasonable notice initially offered by the bank.

CIBC had contested the Superior Court's findings on multiple grounds. The bank argued that the termination provisions within the contracts were, in fact, enforceable, and consequently, the former employees should only have received the minimum entitlements mandated by the CLC. Furthermore, CIBC challenged the employees' efforts to mitigate their losses following termination, asserting that their actions were unreasonable. The bank also disputed the methodology used to calculate the damages awarded to the former staff members.

At the heart of the dispute was the specific wording of the Ghazvini v CIBC termination clause, which was identical across the employment agreements of the three individuals. This clause permitted CIBC to end employment without providing notice or pay in lieu of notice for a range of reasons, including dishonesty, fraud, breaches of trust, unsatisfactory performance, and other violations of employment conditions. The Ontario Court Appeal 2026 ONCA 766 applied the precedent established in Waksdale v. Swegon North America Inc., a 2020 decision, which dictates that any termination provision failing to meet minimum employment standards, even partially, is entirely unenforceable.

CIBC attempted to distinguish its case by arguing that the Waksdale v Swegon North America principle should only apply to provincially regulated employment agreements, not those governed by the Canada Labour Code termination provisions. However, the appellate court found no justifiable reason to create such a distinction, extending the Waksdale approach to federally regulated contexts. The court concurred with the trial judge's assessment that CIBC's contractual definition of "cause" was overly broad, extending beyond the strict statutory standard of "just cause." For instance, the court specifically noted that an act like dishonesty would not automatically constitute just cause for dismissal under the CLC. Unlike the termination provision in Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568, CIBC's clause lacked language preserving minimum statutory entitlements, leading the court to conclude that the unenforceable for-cause provision rendered the entire termination clause invalid.

The critical consequence of the unenforceable for-cause provision was that the former employees became entitled to common law reasonable notice damages, a significantly higher standard than the minimums stipulated by the Canada Labour Code. This outcome underscores the imperative for employers, particularly those under federal regulation, to meticulously review their employment contracts. Any deviation from statutory minimums, even in a severable part of a termination clause, risks invalidating the entire provision and exposing the employer to substantial common law liabilities.

Regarding the calculation of damages, the court found no reason to overturn the trial judge's conclusion that CIBC had failed to demonstrate the employees acted unreasonably by declining alternative job offers that were not comparable to their previous roles. Furthermore, the appellate court upheld the inclusion of both variable incentive pay and annual bonus payments in the overall damages award. This decision was based on CIBC's failure to clearly and unambiguously exclude these components from common law damages within the employment agreements. The dismissal of CIBC's appeal, coupled with the award of costs to the employees, serves as a stark reminder of the stringent requirements for drafting compliant Canada Labour Code termination provisions.

Lawyers and compliance officers must urgently review all employment contracts, particularly for federally regulated employees, to ensure termination clauses strictly comply with minimum statutory standards. This ruling confirms that any defect in a 'for-cause' provision can render the entire termination clause unenforceable, exposing employers to significant common law damages, even if other parts of the clause appear compliant.

Source: Original reporting via legal news coverage.