All employment relationships in Ontario are deemed to be contractual, whether or not a written contract is in place between the parties. When there is no written contract, the common law (judge-made law) imports a number of obligations into the contract that will bind the employer and the employee.
This is not to suggest that written contracts provide perfect inoculation against lawsuits—litigants often misunderstand the obvious; written information may be open to multiple interpretations; and people sue even when they have no case. Two important considerations when making an agreement that you wish to be legally binding and enforceable in a court of law, are:
Employment lawyers will advise you that a motion for summary judgement can be expensive to lose. Not only does the company have to pay the judgement, the company will have to pay the costs of its own counsel and part of the costs of the employee’s counsel. Therefore, there is pressure on the company to offer a suitable severance package to negotiate a settlement rather than leave it to a court to decide with the cost consequences that follow.