CHAUDHRI: How a termination clause was clouded by a business deal
· Toronto Sun
Employers, take note: A boilerplate termination clause will not always protect you.
That’s the blunt lesson from a March 2026 B.C. Court of Appeal ruling that left an Ontario engineering firm on the hook for more than a year’s worth of salary of a terminated employee. This was even though the company had already paid the ex-employee two weeks’ pay as per a contract the employee signed.
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In 2018, Joseph Bouchard sold his engineering firm to FCAPX, an Ontario consulting company, for $120,000. The deal came with two strings attached: Bouchard would come on board as an FCAPX employee, and he’d agree not to compete with them for three years (his employment term) within 100 km of where he worked.
Three contracts were signed to finalize the sale. And here’s where things get interesting.
The Asset Purchase Agreement said Bouchard’s employment “shall be for no less than three years.” But the Employment Contract said something quite different: the company could let him go at any time, for any reason, with only the minimum notice required by Ontario law.
Both documents were signed. Nobody flagged the contradiction. And that oversight would eventually cost FCAPX a lot of money.
Fast forward 21 months. The working relationship had gone sideways. FCAPX wasn’t happy with Bouchard’s performance, and Bouchard wasn’t happy with his role.
When he pushed for changes in July 2020, FCAPX’s response was swift: Bouchard was terminated with just two weeks of pay.
Bouchard, then out of a job and still bound by a non-compete, went back to doing engineering work for some of his old clients. However, these clients had become FCAPX clients as part of the sale.
FCAPX wasn’t pleased. Both sides lawyered up and sued each other.
The court read all three contracts together and found that the Asset Purchase Agreement’s three-year employment guarantee trumped the termination clause in the Employment Contract. Why? Because Schedule A of the Employment Contract said the Asset Purchase Agreement’s terms would “supersede” any conflicting provisions.
FCAPX’s own document undercut its own argument.
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The court also applied some common sense: why would Bouchard ever agree to a three-year non-compete, locking himself out of his own industry, unless he had a guaranteed job for those same three years? He wouldn’t. And the court agreed he didn’t have to.
Under Ontario employment law, when an employer breaks a fixed-term contract early, the employee is typically owed the full remaining salary with no deductions for any income earned in the meantime. FCAPX was ordered to pay Bouchard for roughly 15 months of salary – a steep increase from the original two-week payout.
That said, FCAPX didn’t walk away empty-handed. Bouchard’s post-termination work for three former FCAPX clients was found to be a breach of his non-compete, so the court ordered him to pay FCAPX around $20,700 in damages.
A lesson for business owners: If you’re a business owner selling your company, and you agree to stay on as an employee, your “employment deal” isn’t just the offer letter – it’s every contract in the package. If you’re signing a non-compete, make sure there’s an equally solid employment commitment to match it, in writing, consistently and across all documents. Best practice is to consult an employment lawyer to make sure you are protected as an employee.
A lesson for employers: If you’re the employer buying a business and keeping the founder on staff, know that your purchase agreement promises about employment can override what your Employment Contract says about termination. A boilerplate “at any time, without cause” clause may not protect you if the deal you made says something different. Where separate agreements speak to the terms of employment, they may be read together. Any ambiguity in terms will likely be read against your company. Before finalizing the transaction, have an employment lawyer review all related documents to ensure the terms align and your obligations are clear.
– This column was co-written by employment lawyer Sunira Chaudhri and her associate Samantha Khaouli
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The content of this article is general information only and is not legal advice.