Termination clauses are often the most contested part of any employment contract. This is because the potential damages could be significant. A termination provision that gets deemed unenforceable will entitle an employee to common law damages. For example, an employee with six years of service may be entitled to approximately six months of pay in lieu of notice at common law, compared to only six weeks of notice under Ontario’s Employment Standards Act ("ESA").

In Ontario, the rules of termination provisions have been heavily contested. One issue that has arose recently is whether the use of language that says, “for any reason” and/or “at any time” is inconsistent with the ESA. The argument is that provisions such as s. 53 and 74 of the ESA prohibit employers from terminating employees in certain circumstances. In Baker v. Van Dolder’s Home Team Inc., (2026 ONCA 568) the appeal combined two cases: Baker v. Van Dolder’s Home Team Inc. (2025 ONSC 952) and Li v. Wayfair Canada ULC. (2025 ONSC 2959). Both cases involved termination provisions that allowed the employer to terminate employment "at any time," and the court used the appeals as an opportunity to provide broader guidance on how employment contracts should be interpreted when assessing the termination provisions’ compliance with the ESA.

Baker v. Van Dolder’s Home Team Inc., (2026 ONCA 568)

In the Baker case, Frederick Baker was hired by Van Dolder's Home Team Inc. in November 2020 as its Controller, Head of Finance. His employment agreement provided that the company could terminate his employment "at any time" without cause, provided it paid the minimum notice, termination pay, severance pay, and other entitlements required by the ESA. The agreement also contained a for-cause termination provision stating that, even where the employment was terminated for cause, Mr. Baker would receive any minimum entitlements required by the ESA while also setting out examples of what would amount as just cause for termination.

After Mr. Baker's employment was terminated without cause in March 2023, he received his ESA minimum entitlements but commenced a wrongful dismissal action. He argued that the termination provisions were unenforceable because the phrase "at any time" purported to allow termination in circumstances prohibited by the ESA, such as during a protected leave or in reprisal for exercising statutory rights. The motion judge accepted that argument and held both the without-cause and for-cause termination provisions to be unenforceable, resulting in Mr. Baker becoming entitled to common law reasonable notice damages. The employer, Van Dolder, appealed that ruling.

In the Li case, Song Li was hired by Wayfair Canada ULC in January 2023 as a Senior Product Manager. His employment agreement provided that Wayfair could terminate his employment "at any time and for any reason" by providing only the minimum ESA entitlements. The agreement also defined "cause" by reference to the ESA's wilful misconduct standard.

Mr. Li's employment was terminated without cause in October 2023. After receiving his ESA minimum entitlements, he sued for wrongful dismissal, arguing that the phrase "at any time and for any reason" was unlawful because it purported to permit terminations in circumstances prohibited by the ESA and other workplace legislation, such as the Occupational Health and Safety Act (OHSA). Unlike the Baker motion judge, the motion judge in Li upheld the termination clause because, when read as a whole, it clearly demonstrated an intention to comply with the ESA. Mr. Li appealed that decision.

The Court of Appeal used the two appeals to clarify several principles governing the interpretation of employment contracts. The court emphasized that although employment agreements must be interpreted in a manner that protects employees and respects the remedial purpose of the ESA, contractual interpretation remains an exercise focused on determining the parties' objective intentions. Contracts must be read as a whole and in their proper context, rather than by isolating individual words or phrases and assigning them their broadest possible meaning.

Applying those principles, the Court of Appeal rejected the argument that the phrases "at any time" and "at any time and for any reason" are inherently inconsistent with the ESA. According to the court, both interpretations improperly read the impugned words in isolation and ignored the surrounding contractual language. In both agreements, the termination provisions repeatedly confirmed that the employee would receive at least the minimum entitlements required by the ESA. When viewed in this context, the court found that the parties could not reasonably have intended to authorize unlawful terminations that would violate express statutory prohibitions.

Separate from the issues regarding the wording of "at any time" and "at any time and for any reason", the Court of Appeal also addressed Mr. Baker's for-cause termination provision. Although the contractual definition of "just cause" was broader than the ESA's wilful misconduct standard, the provision expressly preserved Mr. Baker's entitlement to any minimum ESA compensation and benefits. The court held that employers are entitled to incorporate ESA entitlements by reference and are not required to explain in detail the distinction between common law just cause and ESA wilful misconduct. Because the clause preserved ESA minimum standards, it was found to be enforceable.

Takeaways from Baker v. Van Dolder’s Home Team Inc. (2026 ONCA 568)

This decision will likely be welcomed by employers because it adopts a more contextual approach to interpreting termination clauses. The decision essentially says that when looking at the termination clauses, the court will look at the clause as a whole to get a sense of what the intent was of both parties at the time of the termination. This widens the goal posts significantly, as if the termination clause has a saving provision that the employer intends to comply with the ESA minimums, then the clause is likely enforceable.

An issue with the decision is that it places greater emphasis on traditional contractual interpretation principles than on the unequal bargaining power that often exists between employers and employees. In reality, the vast majority of contracts are written by the employer and signed by the employee without much discussion, as the employer can always just choose the next candidate if a prospective employee tries to negotiate a better contract. In many ways, this decision makes what is a valid employment contract murkier as it goes against the recent line of other Court of Appeal decisions that have taken a more employee-friendly approach to interpreting termination clauses.

Although the court ruled that the wording of "at any time" and "at any time and for any reason" does not instantly invalidate a termination clause, having such language also does not save the termination clause. It is better for employers to ensure that their termination clause is reviewed by an employment lawyer every couple of years to ensure that it is consistent with current jurisprudence. As of the date of publication, it remains possible that an application for leave to appeal to the Supreme Court of Canada will be brought. If leave is granted, the Supreme Court could provide further guidance on the interpretation of termination provisions across Canada.

How Suzanne Desrosiers Professional Corporation Can Help

At Suzanne Desrosiers Professional Corporation, we have employment lawyers who keep up to date with the evolving law of termination clauses. For employers, we can help draft termination clauses that protect the employer from facing a potential claim for common law notice. For employees, we can review employment contracts, especially upon termination and inform them of their employment rights.

If you are facing an employment law issue, contact us today as we have helped employees and employers across northern Ontario. To speak to one of our employment lawyers, please call us at (705) 268-6492 or email us at info@sdlawtimmins.com.