The recent Ontario Superior Court of Justice decision in Baker v. Van Dolder’s Home Team Inc. 2025 ONSC 952 (“Baker”), has the employment law world abuzz. While the core of Baker touches on familiar legal ground, it is the specific interpretation of common clauses that is causing a stir.

In Baker, Justice Sproat followed the decision in Dufault v. The Corporation of the Township of Ignace[1] in which the language “at any time” and the employer’s “sole discretion” was found to invalidate the termination clause.  Evidently, Baker confirmed that a termination clause does not need to contain both elements to render it unenforceable: “at any time” alone will suffice.

Background

Frederick Baker sued his former employer, Van Dolder’s Home Team Inc., for wrongful dismissal after his employment was terminated without cause, pursuant to the termination provisions contained within his employment contract.

The “without cause” and “with cause” termination provisions in Mr. Baker’s employment contract provided 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.

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:

  1. Poor performance, after having been notified in writing of the required standard;
  2. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
  3. Theft, misappropriation or improper use of the company’s property;
  4. Violent or harassing conduct towards other employees or customers;
  5. Intentional or grossly negligent disclosure of privileged or confidential information about the company;
  6. Any conduct which would constitute just cause under the common law or statute.

The Court found that the above-mentioned termination provisions in Mr. Baker’s employment contract were unenforceable.

Key Issues and Findings

“Without Cause” Termination Provision

The Court ruled that the aforementioned without cause termination provision was offside the Ontario Employment Standards Act (“ESA”) and therefore unenforceable, citing the recent decision in Dufault. The Court reaffirmed that an employer cannot purport to terminate employment “at any time” as this fails to account for ESA prohibitions on termination in certain circumstances, such as during protected leaves or in reprisal for exercising statutory rights.

“With Cause” Termination Provision

The Court also found that the with cause termination provision was unenforceable as the definition of “just cause” fell short of the ESA’s higher standard of wilful misconduct, disobedience or wilful neglect of duty. Citing Perretta v. Rand A Technology Corporation,[2] the court noted that many employees may not appreciate the difference between the contractual just cause standard, the common law definition, and the ESA’s higher standard.

Notably, Justice Sproat found that the provision was not saved by the addition of the language “except any minimum compensation or entitlements prescribed by the Employment Standards Act”.

Implications for Employers

  1. Heightened Scrutiny: This decision underscores the increasingly stringent standards to which Ontario courts hold employers when drafting termination clauses
  2. Precision in Language: Employers must be extremely careful regarding the language contained within their employment contracts. As Baker demonstrates, even seemingly minor phrases like “at any time” can render a termination clause unenforceable.
  3. Compliance with ESA: Termination provisions must not only comply with the ESA but must also be drafted in a way that clearly demonstrates this compliance on its face.
  4. Comprehensive Review: Employers should consult one of our experienced employment lawyers to conduct a thorough review of their existing employment contracts to ensure all termination provisions are enforceable and up to date with current case law.
  5. Legal Consultation: Given the complexities of employment law, employers should always seek legal advice when drafting or revising employment contracts.

Implications for Employees

  1. Enhanced Protection: This ruling reinforces the Ontario courts’ tendency to interpret employment contracts in favour of employees, particularly with respect to termination provisions.
  2. Awareness of Rights: Employees should be aware that even if they have signed a contract limiting their entitlements upon termination, these provisions will be unenforceable if they do not comply with the requirements set out in the ESA.
  3. Potential for Greater Entitlements: If termination provisions in an employment contract are found to be unenforceable, employees may be entitled to termination pay calculated in accordance with the common law, which often exceeds contractual and statutory minimums.
  4. Importance of Legal Review: If you would like your employment contract reviewed to see if it is affected by this decision, contact our team of experienced lawyers at Levitt LLP for a consultation.

Broader Impact on Employment Law

The Baker decision continues a trend in Ontario employment law that emphasizes strict compliance with the ESA and favours employee protections. It reinforces the principle that any ambiguity or potential for non-compliance with the ESA in termination clauses will likely result in the entire provision being struck down.

This ruling also highlights the ongoing challenge for employers in drafting enforceable termination provisions. Despite best intentions to comply with the ESA, many employers continue to draft clauses that will not withstand judicial scrutiny.

Conclusion

The Baker decision highlights the critical importance of precise and legally sound language in employment contracts. It serves as a stark reminder for employers to review their employment contracts to ensure that the termination provisions are fully compliant with the ESA. Remember: vague or overly broad language can be costly.

As employment law continues to evolve, both parties in the employment relationship must stay informed and seek professional advice to navigate these complex waters. The consequences of non-compliance can be significant, potentially leading to costly litigation and unexpected liabilities.

In an era where employment contracts are increasingly scrutinized, clear, compliant, and carefully crafted agreements are not just beneficial – they are essential. The Baker decision reminds us that in the realm of employment law, details matter, and the courts will continue to hold a high standard in protecting employees’ rights under the ESA.

This blog cannot be relied on as legal advice.

[1] 2024 ONSC 1029.

[2] 2021 ONSC 2111.