Most import ant employ ment law les sons of 2025
Ter min a tion clauses cont inue their free fall
If 2025 proved any thing, it is that the balance of power in Canadian work places has decisively shifted, and employ ers who pre tend oth er wise are pay ing dearly for it.
This was the year courts stopped pre tend ing that the employ ment rela tion ship is a level play ing field. Again and again, judges reminded employ ers that employ ees are vul ner able at ter min a tion, depend ent on their income and entitled to be treated with dig nity. Employ ers who acted as though con tracts alone gov erned the rela tion ship were swiftly dis ab used of that cal cu la tion.
“REMOTE WORK DISPUTES EXPLODED IN 2025, AND EMPLOYERS LARGELY LOST THEM.
Con sist ent with that, ter min a tion clauses con tin ued their free fall in 2025. Des pite years of warn ings, employ ers per sisted in rely ing on slop pily draf ted, over reach ing clauses, many writ ten long before recent appel late guid ance. Courts respon ded pre dict ably by strik ing them down and award ing gen er ous com mon-law notice. The mes sage could not be clearer: if your ter min a tion clause is not pristine, cur rent and con ser vat ive, it is likely worth less.
Bad-faith dam ages also had a ban ner year. Employ ers who delayed pay ments, cut off bene fits pre ma turely, humi li ated depart ing employ ees or ter min ated them at par tic u larly vul ner able moments — dur ing med ical leaves, hol i days or after rais ing com plaints — were pun ished accord ingly. Courts are no longer con tent to simply com pensate employ ees for lost income. They are sanc tion ing employ ers for how dis missals are car ried out.
Remote work dis putes exploded in 2025, and employ ers largely lost them. Attempts to uni lat er ally revoke work-from-home arrange ments, relo cate employ ees or impose rigid attend ance policies were fre quently found to be con struct ive dis missals. Employ ers who believed pan demic flex ib il ity was a tem por ary cour tesy learned — expens ively — that it had become a term of employ ment.
Mis-clas si fic a tion cases were equally unfor giv ing. Busi nesses that treated work ers as inde pend ent con tract ors in name only were ordered to pay ter min a tion pay, over time pay, vaca tion pay and dam ages. Courts showed little patience for form over sub stance. Con trol, depend ency and eco nomic real ity — not con trac tual labels — ruled the day.
Even lay offs, once con sidered a safer altern at ive to ter min a tion, proved treach er ous. Employ ers who imposed lay offs without expli cit con trac tual author ity found them selves facing wrong ful dis missal claims. Good inten tions were irrel ev ant. Legal author ity mattered.
If there was a uni fy ing theme this year, it was judi cial skep ti cism toward employer con veni ence. Cost-cut ting, restruc tur ing and “busi ness real it ies” remain legit im ate, but only when executed law fully and humanely. The days of act ing first and lit ig at ing later are over.
The irony is that none of this should sur prise employ ers. The law had been head ing in this dir ec tion for years. What 2025 revealed is how many organ iz a tions still refuse to adapt.
As we head into 2026, employ ers face a choice. They can con tinue cling ing to out dated con tracts, aggress ive ter min a tion tac tics and wish ful think ing, or they can mod ern ize their employ ment rela tion ships, invest in com pli ant agree ments and treat dis missals as legal events, not admin is trat ive ones.
Courts have spoken. Loudly. Those still not listen ing will hear it again next year, in a judg ment bear ing their name.
Howard Levitt is senior part ner of Levitt LLP, employ ment
and labour law yers with offices in Ontario, Alberta and Brit ish Columbia. He prac tises employ ment law in eight provinces and is the author of six books, includ ing The Law of Dis missal in Canada.