Why Your BC Employment Contracts May Be Costing You Six Figures (And How to Fix Them)

Outdated employment contracts can cost BC employers six figures in wrongful dismissal cases.  When termination clauses fail to comply with current BC Employment Standards Act (“ESA”) requirements, courts rule them unenforceable, requiring employers to pay common law reasonable notice instead of contractual minimums.

Here's what every business owner needs to know about keeping employment contracts current and compliant.

Employment Contracts: Your First Line of Defense (Or Your Biggest Liability)

Employment contracts define the employment relationship: job duties, compensation, benefits, and crucially, termination provisions.  Yet most BC employers treat them as one-time documents, drafted once and filed away forever.  That's a costly mistake.

Why Termination Clauses Require Constant Vigilance

BC courts have taken an increasingly strict approach to termination provisions over the past five years.  Following the landmark Ontario case Waksdale v. Swegon North America Ltd. (2020), courts across Canada – including BC – now often strike down termination clauses that could potentially violate minimum ESA Act requirements, even if they wouldn't actually violate them in the specific circumstances.

This means:

• Language matters more than intent: If even part of a termination clause is deemed to violate the ESA, courts may void the entire provision, even if the employer always intended to comply with the ESA’s minimum standards;

• Ambiguity always favors the employee: If a termination clause can be read two ways, courts will choose the interpretation most favorable to the employee; and

• Old contracts are ticking time bombs: Old employment contracts almost certainly contain language that wouldn't pass judicial scrutiny today.

• Common Termination Clause Problems

Watch for these enforceability red flags in your contracts:

1. "At Any Time" or "For Any Reason" Language

Example: "The Company may terminate your employment at any time for any reason."

Problem: This language is problematic because the ESA prohibits termination for certain reasons – such as statutory leaves or as reprisal for exercising employee rights.  Since employers cannot actually terminate "for any reason," this wording may be deemed to violate the ESA.  In Baker v. Van Dolder's Home Team Inc. (2025), an Ontario court struck down a termination clause specifically because the "at any time" language was found to contravene Ontario’s Employment Standards Act, even though the contract expressly stated it would comply with minimum statutory requirements.

While BC courts have taken a less strict approach in some recent cases, BC employers should exercise caution – the safest approach is to avoid this language entirely.

2. Failing to Account for ESA Changes

Example: "You will receive two weeks' notice per year of service, to a maximum of eight weeks."

Problem: If the ESA is amended to increase minimum notice requirements in the future, this clause could provide less than statutory minimums, making it unenforceable.

3. Attempting to Define Statutory Terms

Example: "For the purposes of this agreement, 'willful misconduct' includes any breach of policy, any act of insubordination, or failure to meet performance standards."

Problem: Don't try to define terms that come directly from legislation.  Even clauses that start with compliant language fail when they attempt to expand or define statutory terms.

4. Using "Sole Discretion" Language

Example: "The Company may, in its sole discretion, terminate your employment."

Problem: Language asserting the employer's "sole discretion" to terminate has been found to violate employment standards legislation.  Courts have ruled that phrases suggesting an employer has absolute, unfettered discretion misstate the legal reality – employers' termination rights are constrained by the ESA.

The Real Cost of Unenforceable Termination Clauses

When a court voids a termination clause, employees become entitled to full common law reasonable notice – not the shorter ESA minimums.

Common law reasonable notice is determined by the Bardal factors: the employee's age, length of service, character of employment, and availability of similar work.  Notice periods can range from a few months to over 24 months, depending on these factors.

Compare this to ESA minimums of 1-8 weeks, and you're looking at a 300-500% (or more) increase in severance costs.

For a manager earning $100,000 annually:

• ESA minimum (5 years service): $9,615 (5 weeks); or

• Common law notice (unenforceable clause): $100,000-$125,000 (assuming 12-15 months).

That's an unexpected six-figure liability from a single flawed clause.

When to Review Employment Contracts

Don't wait for a termination to discover your contracts are problematic. Review contracts:

• Annually for executive and senior management positions;

• Every 3-5 years minimum for all employment contracts, even if unchanged;

• Immediately after BC Employment Standards Act amendments;

• Before any termination or restructuring (gives you time to address issues);

• When roles change significantly (promotions, major responsibility shifts).

What Makes a Termination Clause Enforceable in 2026? 

Strong termination clauses today typically are short and simple and avoid any attempt to go beyond the ESA in any way.  Seemingly innocuous wording can invalidate provisions, so all extraneous words should be removed.

Can You Update Existing Contracts?

This can get tricky.  You generally cannot unilaterally change existing employment contracts to reduce employee entitlements – that requires "fresh consideration" (something new of value given to the employee in exchange for accepting the changes).

Options can include offering a promotion, raise, or bonus in exchange for signing an updated agreement.

Bottom line: Prevention is cheaper than repair.  Get your contracts right from the start.

The Takeaway 

Employment contracts are your first line of defense against wrongful dismissal claims, but they only protect you if they're current, compliant, and enforceable under today's legal standards.

The cost of outdated contracts isn't hypothetical: an unenforceable termination clause can mean tens of thousands, if not hundreds of thousands, in unexpected severance and legal costs.  The cost of prevention?  A fraction of these figures.

Don't wait for a termination to discover your documents are likely unenforceable.  Proactive review and updates are essential risk management for every BC employer.

Need an Employment Contract Audit?

DWS Law offers employment document reviews for BC businesses.  We'll assess your contracts to identify enforceability risks, compliance gaps, and provide prioritized recommendations with updated templates.

If you have any questions or have employment contracts that need review, please contact us at (604) 736 9791 or email Alex Robertson ar@dwslaw.ca.

Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. Should you require legal advice for your particular situation, please get in touch with us. The information for this article was compiled on January 27, 2026.