Ontario business owners and entrepreneurs should take note that, effective October 1, 2025, the Ontario Small Claims court damages limit has been increased from $35,000.00 to $50,000.00.
We expect this to significantly increase commercial, employment, and construction litigation in Ontario.
TAAG Law has surveyed clients from various industries and has prepared the following analysis, commentary, and mitigation suggestions below.
Reach out to us for a complimentary consultation if you are concerned about any lawsuits against your business, have potential claims against others, or have any business law questions generally.
Andrej Litvinjenko, Managing Director
E: andrej@taag.ca
T: 613-709-9443
A. KEY TAKEAWAYS
- Ontario Small Claims max claim amount increased from $35k to $50k.
- Effective Oct. 1, 2025
- Can amend existing claims (subject to procedural amendment, which court can reject)
- Business owners, especially those with employees and/or in construction & trades, can expect more lawsuits, but also greater value in pursuing legal action yourself.
B. ANALYSIS
- Current Small Claims mechanics disincentivize litigation in most circumstances.
- Claims under $15k usually do not make financial sense in Small Claims.
- Max claim ceiling = $35k
- Legal costs = ~$10k - $15k
- Legal costs recovery only up to 15%
- Taking claim to Superior Court (unlimited claim ceiling) increases legal fees at least 2x – 3x, and can take 2-3 years to resolve.
- Claims under $50k usually do not make financial sense in Superior Court
- Small Claims max claim increase to $50k greatly changes strategic considerations for pursuing litigation, especially as a lever to pressure other side to settle.
- Currently:
- Those getting sued usually have more leverage to wait out and push settlement for lower amount. They know plaintiff will have to significantly eat into their awarded damages to win at trial.
- Those with a potential claim (even a slam dunk), often do not have sufficient damages to make a lawsuit financially prudent, or have to take a significant haircut on their damages by suing in Small Claims instead of Superior Court.
C. COMMENTARY: DOUBLE-EDGE SWORD; EMPLOYERS & CONSTRUCTION/TRADES BEWARE
- We expect this change to greatly increase Small Claims litigation in Ontario, both by motivating more parties to commence litigation as well as divert cases previously headed to Superior Court to Small Claims.
- In particular, we expect greater commercial, employment, and construction related claims – both because of this rule change but also due to the challenging economy.
- Employees will feel emboldened to start or file larger claims. Litigation firms will likely increase contingency offerings to support these cases with potentially higher payouts.
- Similarly, construction firms and trades will likely become more litigious. Currently, once the 60-day window to file a construction lien passes, most claims are not financially prudent. The $50k ceiling will change this calculus.
D. PROACTIVE MITIGATION
Below are various strategies you can implement to address this increase to litigation risk. TAAG Law can support you with all such measures.
- Strongly consider incorporating any sole proprietorship to enjoy personal liability protection
- If you have any key agreements that are not in writing, strongly consider putting them into writing
- Watch out for vendors starting to proactively note their rights to interest & penalties on late payment and/or complaints of non-performance / poor performance: they are likely fishing to increase their potential damages as close to $50k as possible.
- Pay closer attention to interest/penalties provisions in contracts you sign and look to negotiate lower.
- If you are the vendor, increase your interest/penalty provisions (remember you cannot exceed 60% interest / year – that is a criminal offense).
- If you think you are more likely to be sued (you are the vendor client, employer), make your contracts subject to binding arbitration (if permitted by law). Arbitration is generally more expensive and less familiar to people: it generally disincentivizes lesser lawsuits.
OR
- If you think you are more likely to sue (you are the vendor), refuse binding arbitration and insist on settling disputes through court. You will generally be better positioned to leverage your claim for settlement.
- If you are an employer, make sure:
- All employees have proper, written agreements
- You have an employee policies manual (required by law) and that it is current with recent employment law changes
- If you do not already have business insurance, consider obtaining it – especially if you are operating as a sole proprietorship or general partnership.
NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. TAAG Law legal professionals will be pleased to discuss resolutions to specific legal concerns you may have.
