The recent decision of the Ontario Court of Appeal in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568 addresses the use of permissive language in termination clauses within employment contracts. Specifically, the Court contemplated whether and in what circumstances a clause that permits the termination of employment “at any time” or “at any time for any reason” was enforceable.
In Baker, two employment contracts – and the orders interpreting them – were before the Court: Mr. Baker’s contract with Van Dolder and Mr. Li’s contract with Wayfair.
Baker v. Van Dolder
Mr. Baker’s employment with Van Dolder was governed by an employment contract that provided for both ‘with cause’ and ‘without cause’ terminations. The ‘without cause’ provision stipulated that the company “may terminate your employment at any time, without just cause, upon providing you with only the minimum notice, or payment in lieu of notice and, if applicable, severance pay, required by the Employment Standards Act”.
The ‘with cause’ provision read that they “may terminate your employment at any time for just cause, without prior notice or compensation of any kind, except any minimum compensation or entitlements prescribed by the Employment Standards Act”.
Mr. Baker was terminated without cause and was entitled to two weeks reasonable notice in accordance with Ontario’s Employment Standards Act. While he was offered additional notice subject to an executed release, Mr. Baker commenced a claim for wrongful dismissal. He alleged the termination provisions were inconsistent with the Employment Standards Act.
A motion judge agreed, and found that the provisions were unenforceable. Specifically, the motion judge found the permission to terminate employment “at any time” was inconsistent with the Employment Standards Act.
Li v. Wayfair
Similarly, Mr. Li’s contract with Wayfair provided for both ‘with cause’ and ‘without cause’ situations. The ‘with cause’ provision permitted Wayfair to “terminate your employment at any time for Cause without notice, pay in lieu of notice, severance, benefits continuance or other compensation or damages of any kind, unless expressly required by the ESA in which case only the minimum statutory entitlements will be provided.”
The ‘without cause’ provision allowed Wayfair to terminate Mr. Li’s employment “after your probationary period concludes, in the absence of Cause, …at any time and for any reason by providing you with only the minimum statutory amount of written notice required by the ESA or by paying you the minimum amount of statutory termination pay in lieu of notice required by the ESA, or a combination of both, as well as paying statutory severance pay required by the ESA, providing benefits continuance for the requisite minimum statutory notice period under the ESA and all other outstanding entitlements, if any, owing under the ESA.”
Mr. Li was terminated without cause and pursuant to his statutory entitlements under the Employment Standards Act, Wayfair paid one week of salary and a continuation of benefits for the same duration. Mr. Li then commenced an action, arguing that the ‘without cause’ and ‘with cause’ provisions were unenforceable, alleging they were inconsistent with the Employment Standards Act.
Like Mr. Baker, Mr. Li alleged that the clauses permitted his termination at any time and for any reason were unenforceable. However, the motion judge rejected this argument. He found that when read as a whole, the employment contract sought only to restrict Mr. Li’s common law entitlements but did not suggest any restriction on his statutory entitlements.
The Appeal
The Appeal Court heard the appeals simultaneously and allowed the appeal in Baker and dismissed the appeal in Li, with the result being that both Mr. Baker’s and Mr. Li’s common law claims for reasonable notice failed.
The Court opined on the purpose of the Employment Standards Act, and that while employment contracts must be interpreted in light of the Employment Standards Act’s purpose and the vulnerability of employees, the ultimate issue is one of contractual interpretation informed by the objective intention of the parties.
A provision is not ambiguous simply because there may be possible alternative readings, but rather, the Court held that “genuine ambiguity only arises where there are two or more reasonable but differing interpretations considered in the context of the entire contract”.
Read in isolation, the phrase “at any time” could suggest a right to terminate employment in circumstances prohibited by the Employment Standards Act. Read in the context of each contract as a whole however, the phrase simply conveyed that a without-cause termination could occur at any point in the employment relationship, subject to the employer’s statutory obligations. The Court therefore concluded that both contracts reflected an intention to comply with the Act, not contract out of it. The same contextual analysis supported the enforceability of the ‘with cause’ provisions.
Key Takeaways
While the Court contemplated both Mr. Baker’s and Mr. Li’s contracts in light of Ontario legislation, the decision has implications for the general practice of employment law across the country.
Courts – and undoubtedly employment lawyers – should not search for hypothetical consistencies with applicable legislation. Rather, when the clause is read in context with the whole of the contract, the question is whether the statutory entitlements are preserved.
Employers must ensure that their clauses respecting termination do not purport to permit terminations that are in conflict with the appropriate employment legislation.
Employees should not assume broad termination language is unenforceable; the contract must be read as a whole to determine whether statutory entitlements are preserved.
Don’t wait for a dispute to test your termination clause. Review your employment contract now—and contact the employment team at DWF (Alberta) LLP for guidance.
Written by Kathleen O’Brien and Alessia D’Aversa