Another Decision Invalidating a Termination Clause in Ontario

In a previous Employer Alert, we described the various cases following Waksdale, a decision that invalidated many longstanding employment agreements in Ontario overnight and changed the legal landscape. In one such post-Waksdale case, Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, the court found a “without cause” termination provision unenforceable as it purported to allow the employer to terminate employment “at its sole discretion” and “at any time”. Ontario Superior Court found that this language contravened the ESA.

In a recent decision, Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, the Ontario Superior Court reviewed an employment contract that contained a provision allowing for without cause termination “at any time”. The Court found both the “without cause” and “with cause” termination provisions unenforceable.

The court determined that the “without cause” termination provision allowing termination “at any time” was inconsistent with the ESA. Taking a very literal reading of the clause, the court found that the clauses fails to recognize that termination is not permitted in certain situations under the ESA, such as employees returning from ESA protected leaves or terminations undertaken as reprisal for exercising their rights under the ESA. This was sufficient to invalidate the “without cause” clause.

The court also found fault with the “with cause” provision, which did not meet the “wilful misconduct” standard required by the ESA. The “with cause” provision had defined “just cause” as including a number of different acts of alleged misconduct (e.g. poor performance, dishonesty, theft, etc.). Drawing from the reasoning in Perretta v. Rand A Technology Corporation, the court emphasized the importance of clearly distinguishing between such a contractual definition of just cause and the ESA threshold of “willful misconduct”, which requires a higher standard of misconduct than the contractual definition of “cause” in this case.

Implications and Moving Forward

The Ontario Court of Appeal has not yet commented on these issues. Notably, as well, the court in Baker did not address the decision of Henderson v Slavkin, 2022 ONSC 2964, where the court had rejected a similar argument and upheld a “without cause” termination provision that used the phrase ‘any time’.

This case serves as yet another reminder for Ontario employers to review their employment contracts. In many cases, it may be best to simply refer to the ESA standards in your employment agreement. Seeking legal advice to draft compliant termination provisions is more important than ever to avoid costly legal disputes.

If you want more information on this topic, you can contact us at:

Geoffrey Howard:       ghoward@howardlaw.ca

604 424-9686

Sebastian Chern:         schern@howardlaw.ca

604 424-9688