Offer letter in Canada: the letter that becomes the contract

First, understand what you are signing

An offer letter is not a brochure and it is not a handshake. In Canada, when a candidate accepts an offer letter by signing it, the letter — together with anything it expressly incorporates, such as a handbook, a confidentiality agreement, or a benefits summary — ordinarily becomes the contract of employment. Courts interpret it as a contract, including its termination clause, and they interpret ambiguity against the party that drafted it — usually the employer.

That has two practical consequences. For employers: every clause you include will be read literally, including the ones you copied from a template without thinking. For candidates: the letter you sign on a Friday afternoon can decide what you are owed if you are let go two years later. Both sides should therefore treat the offer letter with the same care as any contract, because that is what it is. If a separate, formal employment contract is meant to follow, the offer letter should say so expressly — and the two documents must agree on termination terms, or the later document may fail for lack of fresh consideration.

The essentials: job, start date, and the nature of the role

Start with identity and the job itself, stated precisely enough that there is nothing to argue about later:

• Parties — the employer's full legal name (not just a trade name) and the employee's full legal name.
• Job title, duties, and reporting line — a clear description of the role, the department, and who the employee reports to. Vague duties make later disputes about changed responsibilities harder to resolve.
• Work location and hours — the primary workplace, expected hours, and any remote or hybrid arrangement. If the employer wants the right to change location or hours, that right must be stated — an unstated right to make major changes can amount to constructive dismissal.
• Start date — an exact date, and what happens if it moves. State whether the start date can be deferred and by whom.
• Type of employment — permanent (indefinite-term) or fixed-term. A fixed-term offer must state the end date or the event that ends the employment, and whether it can be extended and how.

The permanent-versus-fixed-term distinction deserves care. A genuine fixed-term contract ends on its end date, but the label must match reality: a series of repeatedly renewed 'fixed-term' contracts can be treated as indefinite employment, and ending a fixed term early without a valid early-termination clause can trigger common-law notice for the balance of the term. If extension is possible, say how it happens — by written agreement before the end date, for example — rather than leaving it to implication or habit.

Compensation: say everything, leave nothing to the handbook

Compensation disputes are the most common post-hiring fight after termination, and almost all of them trace back to an offer letter that said 'salary plus benefits' and left the details to an unwritten understanding. State each element:

• Base pay — salary or hourly wage, pay frequency, and the pay period. For hourly roles, state the overtime threshold and rate as required by the province's employment standards.
• Bonus and commission — whether any bonus is discretionary or guaranteed, how it is calculated, when it is paid, and crucially whether it is payable on termination and for what period. Silence on bonus during the notice period is a classic litigation trigger.
• Benefits and pension — what is covered (health, dental, disability, pension or RRSP matching), and when coverage starts. A waiting period should be stated, not discovered on the first paycheque.
• Vacation and statutory holidays — the vacation entitlement and the province's minimums, which vary by province. Do not promise less than the provincial floor, and do not leave vacation timing to an unstated policy.
• Expenses and allowances — vehicle, phone, or remote-work allowances, and whether they require receipts or pre-approval.

Two warnings. First, never promise a bonus, commission, or benefit in a conversation or email that the offer letter contradicts — the letter should contain an entire-agreement clause so that side promises do not survive into the contract. Second, any clause allowing the employer to change pay, duties, or location unilaterally must be express and reasonable; a unilateral change to a fundamental term, imposed without consent, can be a constructive dismissal even if the letter claims a right to make it.

Probation: a contract term, not a statutory status

Probation is widely misunderstood in Canada. Employment standards legislation does not define or require a probation period — it is purely a creature of contract. If the offer letter says nothing about probation, there is no probation period in the legal sense, and the employee has full termination rights from day one.

To create a probation period, the letter must state it expressly: its length (three or six months are the common choices) and its effect (that suitability for permanent employment will be assessed, and that employment may be ended during that period if the employee is found unsuitable). The assessment must be genuine and in good faith — the employer must give the employee a fair opportunity to demonstrate suitability, communicate expectations, and provide feedback. A probation clause used as a pretext to dismiss for a prohibited ground under human rights legislation is unlawful regardless of what the letter says.

And probation never removes the statutory floor. In Ontario, an employee with less than three months' service is owed no statutory termination notice, but once they pass three months they are owed at least one week's notice or pay in lieu — probation or not. The ESA scale then rises with service: two weeks at one year, and one additional week per year of service to a maximum of eight weeks at eight or more years. A probation clause that tries to deny those minimums is void to that extent, and a vague probation clause may fail entirely, leaving common-law notice rights intact from the start.

Conditions: the only safe way to keep an exit open

An offer is often made before every check is complete. The safe way to handle that is a condition stated in the letter itself — not a verbal understanding. Common legitimate conditions include satisfactory reference checks, a background or criminal-record check where the role genuinely requires it, proof of a required licence, certification, or work authorization, and proof of the qualifications the candidate claimed.

Conditions must be genuine, job-related, and applied in good faith. A condition that touches a ground protected by human rights legislation — disability, family status, place of origin, and the other prohibited grounds — cannot be used to withdraw an offer, and a condition used as a pretext will not protect the employer. State the condition, state what 'satisfactory' means in practical terms, and state the deadline for satisfying it. Once the candidate accepts and the conditions are satisfied (or waived in writing), the offer is unconditional — and withdrawing it then is a termination of employment, with the same notice or damages consequences as any other dismissal, including where the candidate resigned from another job in reliance on the offer.

Termination terms: the clause that decides everything later

This is the most valuable paragraph in the offer letter, and the one most often copied carelessly from a template. Canada has no at-will employment: unless a valid clause limits it, an employee dismissed without cause is entitled to reasonable notice at common law, measured by age, length of service, position, and availability of similar work — often many months' pay, far beyond the statutory minimum. A termination clause can limit that exposure to the employment-standards minimum, but only if it is clear, unambiguous, and fully compliant with the applicable statute.

The compliance bar is high, and it is set by Waksdale v. Swegon North America Inc., 2020 ONCA 391. In that case the employer's without-cause clause complied with Ontario's ESA on its own, but a separate for-cause clause did not — and the Court of Appeal struck down the entire termination clause, severability clause notwithstanding, because termination provisions must be read as a whole. The employee, dismissed without cause after eight months, recovered common-law reasonable notice instead of the statutory minimum. The Supreme Court of Canada refused leave to appeal in January 2021, so Waksdale remains the law in Ontario.

The practical rules that follow from Waksdale are strict:

• Every termination provision must comply — with cause, without cause, and during probation. One bad clause voids them all, even the clause the employer actually relies on.
• The clause must not deny any ESA entitlement, including benefit continuation during the notice period and vacation pay on termination pay. Denying benefits during notice is a common, fatal error.
• The clause must not use 'cause' in a way that denies ESA minimums: under the ESA, only wilful misconduct, disobedience, or wilful neglect of duty disentitles an employee to termination pay, and a clause denying pay for ordinary 'cause' or 'just cause' will fail.
• Severability clauses do not save a bad termination clause in Ontario — Waksdale declined to give effect to one.
• The clause should state expressly that it limits entitlements to the statutory minimum and that it complies with the applicable employment standards legislation, and it should be reviewed whenever that legislation changes.

Also address the other side of termination: resignation notice expected from the employee, return of property and confidential information, and what happens to bonus, commission, and benefits on exit. And keep statutory severance pay distinct from termination pay — in Ontario, severance pay under ESA section 64 is a second, separate entitlement, generally for employees with five or more years' service at an employer with a $2.5 million or larger payroll. A clause that says 'termination pay' but is silent on severance pay may not limit severance at all.

Restrictive covenants: mostly, leave them out

Offer letters often carry non-compete and non-solicitation clauses copied from another province's template. In Ontario, that copy-and-paste is now unlawful in most cases: the Working for Workers Act, 2021 (Bill 27) bans non-compete agreements in employment contracts, with narrow exceptions for executives and for sale-of-business contexts. A standard Ontario offer letter should therefore not contain a non-compete at all. Non-solicitation clauses — no poaching the employer's customers or staff for a defined period — are unaffected by the ban and are far more likely to be enforced, provided they are reasonable in duration, geography, and scope. Confidentiality is separate from both and should always be included in its own clause, covering trade secrets, customer lists, pricing, and proprietary information, with a return-of-materials obligation on exit. In Quebec, restrictive covenants are governed by the Civil Code and must likewise be reasonable and limited — never assume an Ontario clause works in Quebec, or vice versa.

Before anyone signs: a checklist for both sides

Employers should confirm: the termination clause complies with the ESA in every part (the Waksdale test); the probation clause is express and does not purport to remove ESA rights; compensation is complete, including bonus-on-termination treatment; any restrictive covenant is enforceable in the province of employment; and the letter names the governing province and contains an entire-agreement clause. Candidates should confirm: the termination clause and what it limits them to; the probation terms; the full compensation picture, including when benefits start; any unilateral-change clause affecting duties, location, or pay; and any restrictive covenant — and should never resign from a current job until the offer is unconditional, in writing, and signed by both sides. Either side that is unsure should have an employment lawyer review the letter before signing: the review costs a fraction of what a void termination clause costs later.

Mistakes that turn offer letters into lawsuits

Almost every offer-letter dispute traces back to one of these avoidable failures:

• A termination clause that violates the ESA in one part — voiding the whole clause under Waksdale
• No termination clause at all — leaving common-law reasonable notice as the default
• A probation clause that is vague, unwritten, or tries to deny ESA minimums
• Compensation stated incompletely — bonus, commission, or benefits left to verbal promises
• Conditions left verbal instead of written — or conditions touching a human rights ground
• A non-compete in Ontario that the Bill 27 ban makes unenforceable
• A fixed-term label that does not match reality — or a fixed term with no early-termination clause
• A unilateral-change clause so broad it amounts to constructive dismissal when used
• Two documents that disagree — an offer letter and a later contract with different termination terms
• Withdrawing an accepted, unconditional offer as if it were not a termination