Termination provisions in employment contracts are constantly under attack by terminated employees seeking severance packages beyond those contemplated by their written agreements. One such challenge which has been hotly debated, arising from the analytical framework established in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029 (“Dufault”), is whether the use of the language “at any time” gives rise to a statutory violation sufficient to invalidate the termination provision.
The essential premise of this argument is that because employers do not have unfettered discretion to terminate employees (for example, employees have reprisal protections), the use of “at any time” language purportedly seeks to give employers blanket discretion to terminate for any reason. The essential counter point is that the Employment Standards Act, 2000 (“ESA”) does not regulate the timing of an employee’s termination, only the reason for that termination, and that the use of “at any time” language reflects the objective intention of the parties that employment is not permanent and is subject to termination.
Today, the Ontario Court of Appeal has issued one of the most anticipated employment law decisions this year in the joint hearing of Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 (“Baker”) and Li v. Wayfair Canada ULC., 2025 ONSC 2959 (“Li”), addressing the enforceability of “at any time” language in termination provisions. We reported on Baker here previously.
In allowing the appeal in Baker and dismissing the appeal in Li, the Court of Appeal held that the termination provisions in both employment contracts “reflect an object intention” to provide the employee with minimum statutory entitlements set out in the ESA, and, accordingly, were valid and enforceable.
Background
In Dufault, the lower court held that a termination clause reserving the employer’s right to terminate “at any time” and “at its sole discretion” breached the ESA. Specifically, the Court held that such language would unlawfully permit termination on the conclusion of a leave, contrary to s. 53, or in reprisal for attempting to exercise an ESA right, prohibited under s. 74. Dufault was later the subject of an appeal, but the appeal was decided on other grounds.
In Baker, the contract contemplated that employment could be terminated 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”. Relying on the clause’s use of “at any time”, and the Court’s decision in Dufault, the lower court held that the ESA did not permit an employer to terminate employment ‘at any time’. Notably, the contractual provision in Baker did not include the same “at its sole discretion” language found in Dufault.
In Li, the without cause provision permitted termination “at any time and for any reason” upon the provision of only the applicable statutory minimums. The lower court held that the provision “clearly and repeatedly indicates payments will be made as ‘required by’ or ‘under the ESA’”, distinguished Dufault and Baker, and concluded that the termination provision was enforceable.
Both Baker and Li were appealed to the Ontario Court of Appeal, and were heard jointly earlier this year.
Decision on Appeal
The Court of Appeal held that the termination provisions in both employment contracts “reflect an objective intention to provide Mr. Baker and Mr. Li with the minimum statutory entitlements set out in the ESA” and were therefore valid and enforceable .
Monahan J.A., writing for the Court, emphasized that employment contracts must be interpreted in a manner that furthers employment law principles, but that determining their meaning remains an exercise in contractual interpretation: the goal is to ascertain the parties’ “objective intentions” from the wording of the contract as a whole, understood in light of the relevant surrounding circumstances. Courts must apply a practical, common sense approach, avoid a legalistic “magic words” analysis – whereby the use of certain words, read in isolation, would determine the legal effect of a provision – and should not strive to find an ambiguity where none reasonably exists.
Applying that framework, the Court held that the words “at any time” and “at any time and for any reason” could not reasonably be understood as permitting the employers to terminate employment contrary to express statutory prohibitions. The Court concluded that read in context. “at any time” reflects a mutual intention that a without cause termination will be valid and legally effective regardless of when it occurs, and is “not intended to render legally effective a termination that is expressly prohibited by the ESA.”
The Court of Appeal also determined it must consider the phrase “for any reason”, and concluded that “for any reason” means that the employer is not required to provide a reason for a without cause termination – it does not exempt the employer from statutory prohibitions against termination at certain times or for certain reasons. The lower court in Baker erred by reading the impugned words “literally and in isolation” and by straining to find an ambiguity where none existed.
Critically, the Court of Appeal also held that Mr. Baker’s with cause provision complied with the ESA. Although its definition of “just cause” was broader than the ESA standard of “wilful misconduct”, the provision expressly preserved any minimum compensation or entitlements prescribed by the ESA. Its legal effect was to ensure that Mr. Baker remained entitled to ESA notice, benefits continuation and severance pay unless his conduct met the higher wilful misconduct standard.
The Court rejected the conclusion that the employer was required to explain the distinction between common law just cause and ESA wilful misconduct. It also rejected the motion judge’s reasoning that “regular employees” unfamiliar with the ESA would assume they had no entitlement if they breached the contractual standards. Notably, the Court stated: “While an employee may not be familiar with what those entitlements are, this is quite a different matter from the employee leaping to the conclusion that the entitlements are nonexistent.”
Because all of the termination provisions complied with the ESA, the Court declined to reconsider Waksdale v. Swegon North America Inc., 2020 ONCA 391.
Significantly, the Court acknowledged that the result might be thought to be “a harsh outcome that fails to give effect to the remedial purpose of the ESA”; however, it pointed out that the ESA itself contemplates that the presumption of common law reasonable notice can be excluded by express contractual terms. If the minimum entitlements under the ESA are considered insufficient substitutes for common law reasonable notice, “that is a matter for the legislature rather than the courts.”
Takeaways from the Court of Appeal’s Decisions in Baker and Li
Uncertainty has persisted since Dufault, with cases like Li and Jones v. Strides Toronto, 2025 ONSC 2482 (“Jones”) standing for the proposition that the phrase “at any time” does not necessarily render a termination provision unenforceable, particularly in the absence of “sole discretion” language which was present in Dufault. On the other hand, Baker and Chan v. NYX Capital Corp., 2025 ONSC 4561 (“Chan”) are examples of cases which have followed Dufault. As a result, the reasoning in the Li and Jones decisions was directly contradictory to that in Dufault, Baker and Chan.
The Court of Appeal has now conclusively clarified that “at any time”, by itself, is not problematic: the phrase must be read in the context of the employment agreement as a whole to determine the objective intentions of the parties. The same analysis applies to “at any time and for any reason.”
This landmark decision also confirms that a contractual definition of just cause may be broader than the higher ESA wilful misconduct standard, provided that the provision preserves the employee’s minimum compensation and entitlements under the ESA.
Careful drafting regarding the parties’ objective intention remains essential. However, this decision emphasizes that ambiguity should not be strived for where it does not reasonably exist. Employers are encouraged to regularly have their employment contracts reviewed to ensure they contain appropriate language dealing with entitlements on termination. That said, this decision represents a practical approach to contractual interpretation supporting the enforceability of thoughtfully drafted termination provisions in employment contracts.
