For several years, Ontario employers — especially founders and owners of small and medium-sized companies — have lived with growing uncertainty around termination clauses. A series of lower-court decisions after Dufault made it increasingly difficult to rely on carefully drafted employment agreements that limited severance to Employment Standards Act minimums. The practical result was a contingent liability that many business owners only discovered when they needed to let someone go.
On August 6, 2026, the Ontario Court of Appeal released its decision in Baker v. Van Dolder’s Home Team Inc. (heard together with Li v. Wayfair Canada ULC). The decision provides meaningful clarity and, for many employers, a measure of relief.
The problem that had developed
After Dufault, some judges treated the ordinary words “at any time” (and in some cases “for any reason”) as fatal to a without-cause termination clause. The theory was that those phrases could be read as authorizing terminations the ESA prohibits. Once a clause was struck, the employee became entitled to common-law reasonable notice — often measured in months rather than the weeks required by statute.
For a founder who has spent years building a business, that shift in risk is significant. A single terminated employee with a few years of service can suddenly represent a six-figure liability. Multiply that across a growing team and the contingent exposure becomes hard to ignore. Many owners were left wondering whether the contracts they had signed in good faith still offered any real protection.
What the Court of Appeal decided
The Court rejected the highly technical approach that had taken hold. Justice Monahan, writing for a unanimous panel, confirmed that employment contracts must be read as a whole. The central question is the parties’ objective intention, not whether isolated words can be stretched into a hypothetical ESA violation.
In the Wayfair contract, the clause allowed termination “at any time and for any reason” while repeatedly tying the employee’s entitlements to ESA minimums. The Court held the language enforceable. “At any time” simply confirms that a without-cause termination is effective whenever it occurs. “For any reason” simply means the employer does not have to provide a reason. Neither phrase, on its own, signals an intention to contract out of the ESA when the rest of the clause affirms compliance.
Why this matters
The decision does not give employers a free pass. Clauses that actually undercut ESA minimums, or that fail to properly distinguish contractual just cause from the higher statutory standard of wilful misconduct, remain vulnerable. But it does restore a more practical reading of contracts that were drafted with the clear intention of meeting, not avoiding, statutory standards.
For founders and business owners who have worked hard to build something of value, the ruling reduces one source of unexpected downside risk. It makes it more likely that a well-drafted termination provision will be given effect rather than set aside on technical grounds.
This is general information only and not legal advice. Termination language remains fact-specific. Anyone relying on existing employment agreements should have them reviewed in light of the Court of Appeal’s reasons.