Ontario employers and employees have faced considerable uncertainty in recent years over the enforceability of termination provisions in employment agreements. In particular, courts have grappled with whether seemingly innocuous phrases such as “at any time” or “for any reason” can render a termination clause unenforceable because Ontario legislation prohibits employers from terminating employees in certain circumstances.
The Ontario Court of Appeal has now provided important guidance.
On on August 6, 2026, the Ontario Court of Appeal released two decision in appeals it dealt with together: Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 and Li v. Wayfair Canada ULC., 2025 ONSC 2959. Although the termination provisions in the two employment agreements contained similar language, the Superior Court had reached different conclusions about their enforceability. The Court of Appeal upheld the termination provisions in both cases and, in doing so, clarified how Ontario courts should interpret employment agreements.
The Conflicting Decisions in Baker and Li
In Baker, the employee’s agreement permitted the employer to terminate his employment “at any time” without cause, provided that he received the minimum entitlements required by the Employment Standards Act, 2000 (the “ESA”).
The Superior Court found the provision unenforceable. Relying in part on the reasoning in Dufault v. The Corporation of the Township of Ignace, the Court concluded that the phrase “at any time” could permit termination in circumstances in which the ESA prohibits an employer from terminating an employee (for example, as a reprisal for exercising rights under the ESA). The Court also found problems with the agreement’s termination-for-cause language.
By contrast, in Li, the employment agreement allowed Wayfair to terminate the employee “at any time and for any reason,” while repeatedly providing that the employee would receive at least his minimum statutory entitlements under the ESA. The Superior Court upheld the clause, finding that the agreement, when read as a whole, demonstrated an intention to comply with the ESA.
The conflicting outcomes placed the issue squarely before the Court of Appeal.
The Court of Appeal Rejects an Overly Technical Approach
The Court of Appeal allowed the employer’s appeal in Baker and dismissed the employee’s appeal in Li. As a result, the termination provisions in both agreements were upheld.
More importantly, the Court provided broader guidance on contractual interpretation in the employment context.
Employment agreements remain different from ordinary commercial contracts. Courts must continue to recognize the inequality of bargaining power that frequently exists between employers and employees and the importance of protecting employees’ statutory rights.
However, the Court emphasized that interpreting an employment agreement remains an exercise in contractual interpretation. The objective is to determine the parties’ objective intentions from the words they used, considered in the context of the agreement as a whole and the relevant surrounding circumstances.
That means courts should not isolate individual words and search for hypothetical interpretations that the parties could not reasonably have intended.
“At Any Time” Does Not Mean “Regardless of the Law”
The employees argued that language allowing termination “at any time” could include times when termination is prohibited by the ESA or other legislation.
The Court of Appeal rejected that interpretation.
The Court held that when the contracts were read as a whole, they demonstrated an intention to comply with the ESA. Against that backdrop, it would make little sense to interpret “at any time” as granting the employers a contractual right to disregard statutory prohibitions.
Instead, the language simply reflected the employer’s ability to terminate the employment relationship without cause, subject to the contract and applicable law. Similarly, the words “for any reason” did not authorize termination for an unlawful reason; they indicated that the employer was not required to establish cause or provide a reason for a lawful without-cause termination.
The decision therefore substantially undermines arguments that the phrases “at any time” or “for any reason,” standing alone, make a termination clause unenforceable.
The Court Also Clarifies “For Cause” Provisions
The Court of Appeal also addressed an important issue concerning the distinction between common law just cause and the ESA’s higher “wilful misconduct” standard.
An employee may engage in misconduct that constitutes just cause at common law without necessarily losing their minimum statutory termination entitlements under the ESA. This distinction has caused a number of termination clauses to fail where the agreement purported to eliminate all termination entitlements whenever the employer had common law cause.
Mr. Baker’s agreement defined cause more broadly than the ESA standard. Importantly, however, the agreement expressly preserved any minimum compensation or entitlements required under the ESA.
The Court held that this was sufficient. An employment agreement does not necessarily have to reproduce or explain the statutory test for wilful misconduct. What matters is whether the agreement preserves the employee’s minimum statutory entitlements when those entitlements are legally required.
What About Waksdale?
The Court’s decision does not overturn Waksdale v. Swegon North America Inc., 2020 ONCA 391.
Under Waksdale, termination provisions must generally be considered together, meaning that an unlawful “for cause” provision can render an otherwise valid “without cause” provision unenforceable.
Van Dolder sought to have Waksdale reconsidered. A five-judge panel was not convened, however, and the Court ultimately declined to revisit the issue because it concluded that both of the termination provisions before it complied with the ESA. Waksdale therefore remains binding law in Ontario.
What Does Baker Mean for Employers and Employees?
Baker represents an important shift away from highly technical challenges based on isolated words in an employment agreement. The presence of language such as “at any time” or “for any reason” will no longer, without more, invalidate an otherwise lawful termination provision.
But the decision should not be understood as giving employers a free pass on drafting.
A termination provision that actually provides less than the employee’s minimum statutory entitlements can still be unenforceable. Likewise, Waksdale remains applicable where another termination provision improperly contracts out of the ESA.
For employers, Baker is nevertheless welcome clarification. Employment agreements should still be reviewed carefully to ensure that termination provisions clearly preserve all minimum statutory entitlements, including notice or termination pay, benefits continuation and, where applicable, severance pay.
For employees, the analysis of a termination clause remains highly fact-specific. While certain technical arguments may now be more difficult following Baker, the enforceability of a termination clause continues to depend on the wording and structure of the agreement as a whole.
Ultimately, Baker does not eliminate disputes over termination provisions. It does, however, send a clear message about how those disputes should be approached: employment agreements should be interpreted contextually and as a whole, rather than through an isolated search for words that might conceivably produce an unlawful result.