Ontario Court of Appeal Clarifies Enforceability of Employment Termination Clauses
October 14, 2026
Perley-Robertson, Hill & McDougall LLP/s.r.l. is highlighting a recent Court of Appeal for Ontario decision that resolves uncertainty surrounding common wording in employment termination clauses, with implications for employers across the province.
Released on August 6, 2026, following a hearing in March, the decision in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568 and the companion decision in Li v. Wayfair address conflicting lower court rulings on the phrases “at any time” and “for any reason.” The court found that these words do not automatically invalidate a termination clause where the agreement, read as a whole, indicates an intention to comply with Ontario’s Employment Standards Act, 2000 (ESA).
The court confirmed that employment agreements must be interpreted with regard to their particular context, including the relationship between employers and employees. However, individual words and phrases must not be considered in isolation, and courts should not strain to find ambiguity based solely on hypothetical interpretations.
In these cases, the court found that the disputed wording could not reasonably be understood as allowing employers to terminate employment in circumstances expressly prohibited by statute.
The decisions provide greater clarity for employers whose agreements contain this language. They also reinforce the importance of reviewing termination provisions as a whole to ensure compliance with ESA minimum requirements. An unenforceable provision can leave an employer exposed to substantially greater termination costs.
Karin Pagé, a partner at Perley-Robertson, Hill & McDougall LLP/s.r.l., discusses the decisions and their practical implications in her Ottawa Business Journal article, Court of Appeal Addresses Broken Law Surrounding Termination Clauses. The article examines the legal developments leading to the rulings and outlines considerations for employers reviewing their existing agreements.
Employers should continue to review employment contracts regularly, including both termination with cause and termination without cause provisions. Ensuring these terms meet statutory requirements remains essential, even with the clarity provided by the recent decisions.
The firm’s Employment Law Group assists employers with drafting and reviewing employment agreements, assessing termination provisions and addressing workplace legal matters. Its lawyers provide practical advice and have extensive experience representing clients before all levels of court in Ontario.
For more information, visit perlaw.ca.