Ontario Court of Appeal Clarifies Interpretive Framework for Termination Clauses in Employment Contracts

Quick Hits

• In Baker v. Van Dolder’s Home Team Inc. (2026 ONCA 568), the Ontario Court of Appeal unanimously held that without-cause termination provisions containing the words “at any time” or “at any time and for any reason” are not, by that language alone, inconsistent with the Employment Standards Act, 2000 (ESA) and are therefore enforceable.
• The decision provides an authoritative interpretive framework: termination provisions must be read in context, with a view to the objective intentions of the parties, rather than through a literal, isolated reading that strains to find ambiguity where none exists.
• The court also confirmed that a with-cause provision defining “cause” more broadly than the ESA’s “wilful misconduct” standard is enforceable where it expressly preserves the employee’s minimum ESA entitlements.

The decision offers much-needed clarity for employers and employment counsel seeking to draft enforceable termination provisions that limit obligations to ESA minimums without running afoul of the statute.

The Facts

Frederick Baker commenced employment with Van Dolder’s Home Team Inc. on November 2, 2020, as its controller, head of finance, at an annual salary of $95,000 plus benefits. His employment contract contained a without-cause provision permitting Van Dolder to terminate his 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 contract also contained a with-cause provision and a separate “Minimum Standards” clause providing that the ESA would prevail over any inconsistent contractual term.

On March 24, 2023, Van Dolder terminated Mr. Baker’s employment without cause. Mr. Baker was seventy-one years old and entitled to two weeks of statutory notice. He declined a release and commenced a wrongful dismissal action, arguing the termination provisions were inconsistent with the ESA and therefore void.

In a companion case, Song Li commenced employment with Wayfair Canada ULC on January 23, 2023, as a senior product manager at an annual salary of $221,546. His contract permitted termination without cause “at any time and for any reason” while repeatedly affirming that he would receive the minimum statutory entitlements under the ESA. Wayfair terminated Mr. Li’s employment without cause on October 17, 2023.

Conflicting Decisions Below

The two cases produced irreconcilable results at the Ontario Superior Court of Justice.

In Baker v. Van Dolder, the motion judge found the “at any time” language inconsistent with the ESA because it could be read to permit termination at times expressly prohibited by statute—such as upon the conclusion of an employee’s leave (s. 53) or as a reprisal (s. 74). The motion judge also struck down the with-cause provision for failing to explain the ESA’s “wilful misconduct” standard to “regular employees.”

In Li v. Wayfair, a different motion judge found the virtually identical “at any time and for any reason” language enforceable, reasoning that the contract as a whole clearly sought to limit entitlements to ESA minimums.

As the Court of Appeal observed, this was precisely the kind of inconsistency that had plagued the jurisprudence for years, with virtually identical provisions yielding opposite results.

The Court of Appeal’s Interpretive Framework

The Court of Appeal set out an interpretive framework built on established principles.

First, employment contracts must be interpreted differently from ordinary commercial agreements to further employment law principles, most notably the protection of vulnerable employees. Second, determining the meaning of an employment contract remains an exercise in contractual interpretation: the goal is to ascertain the objective intentions of the parties as expressed in the wording of the contract as a whole, understood in light of the relevant surrounding circumstances. Third, courts should avoid a “magic words” approach and should not strain to find ambiguity where none reasonably exists.

Applying this framework, the court held that the words “at any time” simply reflect a mutual intention that a without-cause termination will be valid and legally effective regardless of when it occurs—not that the employer is entitled to ignore express statutory prohibitions. This interpretation is consistent with nearly three decades of jurisprudence, including the Supreme Court of Canada’s foundational judgment in Wallace v. United Grain Growers Ltd.

The court further held that the addition of “for any reason” simply means that the employer is not required to give the employee a reason for the termination—not that the employer could plausibly claim the contract exempted it from statutory prohibitions.

On the with-cause provision in Mr. Baker’s contract, the court found that because it expressly preserved minimum ESA entitlements even where the contractual standard of “just cause” was met, the provision was aligned with the ESA. The motion judge’s requirement that employers explain the difference between contractual cause and statutory wilful misconduct was an error in principle.

The court declined to reconsider Waksdale, since both the without-cause and with-cause provisions in both contracts were found to comply with the ESA.

What This Means for Employers

“At any time” and “for any reason” language is safe—in the right context. The court has definitively confirmed that these common drafting phrases do not, by themselves, render a termination provision inconsistent with the ESA, provided the clause as a whole reflects an intention to comply with statutory minimums. Employers with existing contracts containing this language can take considerable comfort from the decision.

Contextual interpretation prevails over literal, isolated readings. The decision firmly rejects an approach that seizes on individual words or phrases and assigns them a meaning divorced from the contract as a whole. Employers may want to ensure that their contracts contain clear, repeated references to ESA compliance, as these contextual markers are precisely what courts will rely on to uphold enforceability.

Referential incorporation of ESA entitlements remains effective. The court reaffirmed that employers may validly incorporate ESA minimum entitlements by reference, without needing to spell out the precise scope of those entitlements in the contract. This includes with-cause provisions: defining “cause” more broadly than wilful misconduct is not fatal, so long as the provision preserves the employee’s right to ESA minimums when conduct falls short of the statutory standard.

A “Minimum Standards” clause adds a belt to the suspenders. The court relied heavily on the clause in Mr. Baker’s contract providing that the ESA would prevail over any inconsistent contractual term. While not strictly required, such a clause reinforces the interpretive context that the parties intended ESA compliance.

No obligation to explain the law in the contract. The court rejected the motion judge’s suggestion that employers must explain the ESA’s wilful misconduct standard or how it differs from contractual just cause. This removes what would have been an unworkable drafting burden, but employers may still wish to ensure that the contract clearly preserves ESA floor entitlements upon a for-cause termination.

Consistency in the jurisprudence—at last? The court expressly acknowledged the “uncertainty” and “myriad of cases” that have plagued this area. By articulating a clear, principled framework rooted in contextual interpretation and objective intention, the decision should reduce—though perhaps not eliminate—the risk of conflicting outcomes at first instance.

The Bottom Line

Baker v. Van Dolder’s Home Team Inc. is the most significant Ontario appellate decision on termination clause enforceability in years. It resets the interpretive approach away from formalistic, word-by-word scrutiny and back toward the contextual, purposive framework endorsed by the Supreme Court of Canada. For employers and counsel drafting employment contracts, the message is clear: well-constructed termination provisions that express an intention to comply with the ESA—through repeated statutory references, ESA-compliance clauses, and preservation of minimum entitlements—will be enforced according to their terms.

Ogletree Deakins’ Canada offices will continue to monitor developments and will post updates on the Canada, Cross-Border, and Employment Law blogs as additional information becomes available.