Why 90% of Canadian Employment Contracts Will Be Invalid by 2026 (And How to Fix Yours Now)

Let's cut through the noise here. While that 90% figure makes for a compelling headline, the reality is more nuanced: but no less important for Canadian employers.

Recent court decisions and upcoming regulatory changes are definitely shaking things up in employment law, and some contracts are getting tossed out entirely. But we're not looking at a complete contractual apocalypse. What we are seeing is a legal system that's getting tougher on employers who try to push the boundaries of what's enforceable.

Here's what's actually happening and what you need to do about it.

The Court Case That's Making Employers Sweat

The big wake-up call came from a recent Ontario Superior Court decision in Ghazvini v. CIBC. The bank thought they had a bulletproof termination clause: turns out, they were dead wrong.

CIBC's contract tried to redefine "just cause" for termination, listing things like poor performance and policy breaches as grounds to fire someone without notice or severance. Sounds reasonable, right? The court didn't think so.

Here's the problem: under the Canada Labour Code, "just cause" has a very specific, very narrow legal definition. It's essentially limited to serious misconduct: think theft, violence, or gross insubordination. When CIBC tried to expand that definition in their contract, they crossed a line.

The court's message was crystal clear: employers cannot redefine what constitutes "just cause" in their contracts. Period.

When the judge struck down the termination clause, CIBC employees became entitled to reasonable notice at common law instead of the limited contractual formula. That's potentially months more severance pay: a costly mistake.

What This Means for Your Business

This isn't just about one bank's legal troubles. The principles from this case apply across Canada, and they highlight a fundamental shift in how courts are treating employment contracts.

Key takeaway: If your termination clause attempts to define or expand what constitutes "cause," it could be unenforceable. And if one clause is deemed illegal, courts often throw out the entire termination provision, leaving you exposed to much higher severance obligations.

Think about it: if you're paying someone reasonable notice at common law instead of your carefully crafted (and much cheaper) contractual minimums, that's not just expensive. It's potentially business-threatening expensive.

The 2026 Changes You Actually Need to Worry About

While the CIBC case deals with existing contract issues, there are real changes coming in 2026 that will affect how you hire and manage employees. These aren't contract-invalidating changes, but they're compliance requirements that could cost you if you're not prepared.

New Job Posting Requirements (Starting January 1, 2026)

If you have 25 or more employees, get ready for much more detailed job postings. Here's what you'll need to include:

• Mandatory compensation details: Salary ranges, wage rates, or commission structures

• AI disclosure information: If you're using artificial intelligence in your hiring process, you need to say so

• Vacancy status: Whether it's a new position or replacement

• No "Canadian experience" requirements: This discriminatory practice is now explicitly banned

You'll also need to document and communicate hiring decisions to all interviewed candidates within 45 days. Miss this deadline, and you could face compliance issues.

Updated Employment Agreement Requirements

Ontario employers with 25 or more staff need to include specific pre-employment information in their agreements:

• Legal name and contact details

• Specific work location

• Starting wage or salary

• Employment status (full-time, part-time, etc.)

Federal Wage Equity Rules

For federally regulated employers, new Equal Treatment Wage Rules prohibit paying part-time, seasonal, or temporary employees less than permanent, full-time colleagues for the same work. This also applies to Temporary Help Agencies, which can't pay workers less than what client companies pay their direct employees for identical work.

Right to Disconnect Policies

Federally regulated employers must implement Right to Disconnect policies in consultation with employees or unions. This isn't just paperwork: you need actual policies that respect employees' time outside work hours.

How to Fix Your Contracts Before It's Too Late

The good news? Most of these issues are preventable with the right approach. Here's your action plan:

1. Audit Your Termination Clauses Immediately

Look for any language that attempts to define "just cause." Common problematic phrases include:

• "For cause includes but is not limited to..."

• Specific examples of what constitutes cause

• Broad definitions that go beyond serious misconduct

Better approach: Keep it simple. Reference statutory minimums without trying to expand or define what constitutes cause.

2. Review Your Entire Contract Package

Don't just focus on termination clauses. Look for other provisions that might conflict with current employment standards:

• Overtime policies

• Vacation entitlements

• Benefits continuation

• Non-compete clauses (remember, these are being banned federally in 2026)

3. Prepare Your Hiring Process for 2026

Start building systems now:

• Create templates for the new job posting requirements

• Develop tracking systems for candidate communications

• Review your AI tools and prepare disclosure language

• Train your HR team on the new timeline requirements

4. Implement Record-Keeping Systems

You'll need to retain job postings, applications, and all candidate communications for three years. Set up systems now rather than scrambling later.

5. Consider Professional Review

Given the complexity and stakes involved, having your contracts reviewed by employment lawyers isn't just smart: it's essential. The cost of a legal review is nothing compared to the potential cost of an unenforceable contract.

The Real Risk (And Opportunity)

Here's what many employers are missing: while these changes create compliance challenges, they also create competitive advantages for businesses that get ahead of them.

Companies that proactively update their contracts and hiring processes will:

• Avoid costly legal disputes

• Attract better talent with transparent hiring practices

• Build stronger employee relationships through clear communication

• Position themselves as employers of choice in a competitive market

Meanwhile, businesses that ignore these changes risk:

• Unenforceable contracts leading to expensive severance payments

• Compliance violations and potential penalties

• Damage to their employer brand

• Loss of competitive talent to more transparent competitors

Why Act Now?

The employment law landscape is shifting faster than many employers realize. Court decisions like Ghazvini v. CIBC aren't isolated incidents: they're part of a broader trend toward protecting employee rights and limiting employers' ability to contract out of statutory protections.

The 2026 changes aren't suggestions: they're legal requirements. Waiting until the last minute means rushed implementation and increased risk of mistakes.

Start your contract audit today. Review your termination clauses, prepare for the new hiring requirements, and consider whether your current employment agreements will still be enforceable under the changing legal landscape.

Need help navigating these changes? AALAW's employment law experts can review your contracts, ensure compliance with upcoming requirements, and help protect your business from costly legal mistakes. Contact us for a consultation and stay ahead of the curve.

The employment law game is changing. Make sure you're playing by the new rules.