Special thanks to our articling student Keyonna Trojcak for contributing to this update.

Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, following a novel finding in the recent case of Dufault v. The Corporation of the Township of Ignace[1], held, among other findings, that a “without cause” termination provision was not enforceable because it permitted the employer to terminate employment “at any time.” The Court concluded that this violated the Employment Standards Act, 2000 (“ESA”), which does not allow an employer to terminate at any time (e.g. as an act of reprisal or at the conclusion of an employee’s statutory leave). The Court found that the language in the clause specifically incorporating compliance with the ESA was insufficient to “save” the provision.

Key Takeaways

Baker serves as, yet another, reminder to employers to take great care when they draft termination provisions. It also shows how in Ontario, even the slightest discrepancy a court finds can render a termination clause void. This approach is different than other common law provinces, which are more likely to uphold termination clauses that are not unconscionable and do not clearly violate the applicable employment standards legislation.

Thus, employers in Ontario should review their agreements annually to ensure they meet the requirements of the ESA and to keep up with updates in case law. In particular, employers should revise their employment agreement templates to remove sweeping phrases like “at any time” or “for any reason” from the termination provisions.

Background

The defendant had ended the plaintiff’s employment without cause. The Court was asked to determine whether the plaintiff’s termination clause in their employment agreement was enforceable. The relevant terms from the plaintiff’s employment agreement were as follows:

“Termination without cause: we 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. If any additional payments or entitlements, including but not limited to making contributions to maintain your benefits plan, are prescribed by the minimum standards of the Employment Standards Act at the time of your termination, we will pay same. The provisions of this paragraph will apply in circumstances which would constitute constructive dismissal.”

“Termination with cause: we 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. Just cause includes the following conduct:

a. Poor performance, after having been notified in writing of the required standard;

b. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);

c. Theft, misappropriation or improper use of the company’s property;

d. Violent or harassing conduct towards other employees or customers;

e. Intentional or grossly negligent disclosure of privileged or confidential information about the company;

f. Any conduct which would constitute just cause under the common law or statute. “

Justice Sproat applied the Dufault case, and found that the “without cause” termination clause was unenforceable. This is because it stated the employer could end employment without cause “at any time”, but employers cannot end employment “at any time” under the ESA. The Court confirmed that general language stating that the employer will comply with the ESA would not save such statements.

Interestingly, the Court also found that the “with cause” provision (which also contained “at any time” language) was unenforceable, despite expressly stating that employees would still receive “any minimum compensation or entitlements prescribed by the Employment Standards Act.” Notably, Justice Sproat explained that “Given that many employees will not be familiar with the ESA provisions, many employees would assume that they had no entitlement if they breached the contractual standards”. The Court noted that the employer failed to properly detail or explain the  ESA’s “wilful misconduct” standard, and that it differs from the contractual standard. This finding is novel, as it has not been suggested in prior case law that employers must explicitly define or explain the ESA “wilful misconduct” standard if they are to impose a contractual “cause” standard.

As a result, the Court dismissed the employer’s motion for summary judgement. The Court noted that although the employer intended to comply with the ESA, the current law sets “an exacting standard that many employers and knowledgeable counsel have failed to attain despite their good faith and best efforts.”

The case is currently under appeal. We will continue to monitor this and provide updates as needed.

For support reviewing your company’s employment agreements (and the termination provisions contained therein), please contact a member of our team. The upfront investment in legal review can reduce the need for lengthy (and costly) disputes later.

[1] 2024 ONSC 1029 (aff’d 2024 ONCA 915).