When Contracts Backfire: What the Dufault Case Means for Employers

Employment contracts are meant to give clarity and protection for both employers and employees. But as a recent case shows, if they’re not written carefully, they can do the opposite—leaving businesses exposed to major financial risk. 

What Happened 

The Township of Ignace hired an employee on a three-year contract. Less than a year in, they ended her employment and offered two weeks’ pay, believing their contract covered them. 

It didn’t. 

Courts found several problems in the termination clause: 

• It used broad language like “at any time” and “at the employer’s sole discretion,” which suggested the Township could ignore basic employee protections. 

• It only offered notice on “base salary,” when the law requires all regular wages to be included. 

• It included a “for cause” section that didn’t align with employment standards. 

  
  

Because of these issues, the entire termination clause was thrown out. Instead of paying two weeks, the Township had to pay more than $150,000—essentially covering the balance of the contract. 

Why It Matters to SMBs 

This case is a clear reminder: in Ontario, even small errors in an employment contract can make the whole thing invalid. And when that happens, the employer is on the hook for common law entitlements, which are often far more expensive than expected. 

For small and mid-sized businesses, that could mean: 

• Unexpected liability — tens of thousands in severance you didn’t plan for. 

• Operational disruption — dealing with disputes instead of focusing on growth. 

• Reputation risk — poor handling of terminations can affect culture and hiring. 

What You Can Do 

The takeaway for business owners is simple: contracts must be clear, compliant, and regularly reviewed.

Here’s how we help at A&A Consulting: 

• Contract Reviews – We spot risky language and flag where updates are needed. 

• Practical, Compliant Agreements – Written in plain language, enforceable, and fair. 

• Ongoing Support – As laws and best practices evolve, we keep your documents current. 

The Bottom Line 

The Dufault case is another reminder that “close enough” isn’t good enough when it comes to contracts. Small mistakes can lead to big costs.