Earlier this year, the Ontario Court of Appeal’s landmark decision in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568 (“Baker“) directed courts to read termination provisions practically and in context, focusing on the parties’ objective intention rather than seizing on isolated words. We reported on Baker here previously. The Ontario Superior Court of Justice has now applied that framework in Henshell v. BFN of Ojibways, 2026 ONSC 5768 (“Henshell“).

In Henshell, the Court held that a termination clause was valid and enforceable even though a separate “rules and regulations” provision stated that any breach of the employer’s confidentiality policies “will be cause for severe discipline and/or termination of employment for cause.” The Court also struck the employee’s claim for moral and punitive damages, dismissing the action in its entirety without leave to amend. The decision is an encouraging early signal that Baker may curb the long line of cases invalidating termination clauses based on language found elsewhere in the contract.

Background

The plaintiff, a lawyer with 20 years of experience, left her law practice to become Chief Executive Officer of Batchewana First Nation of Ojibways (“BFN”). She was employed under a written agreement from May 6, 2024 until she was terminated without cause on July 23, 2024, less than three months later. The termination clause permitted BFN to terminate employment “for any lawful reason” upon providing such notice or pay in lieu of notice “as is required by the Canada Labour Code,” along with any other Canada Labour Code (“CLC”) entitlements, including severance pay, and excluded further notice under the common law.

The plaintiff sued for 24 months’ pay in lieu of reasonable notice, and for moral and punitive damages. She alleged she was dismissed in retaliation for raising concerns about potential financial misappropriation under certain legal retainers.

The plaintiff did not attack the termination clause itself. Instead, she focused on the confidentiality language in the “rules and regulations” provision of the agreement, arguing that it purported to permit termination for cause, without CLC entitlements.

The Decision

BFN brought a motion under Rule 21.01 of the Rules of Civil Procedure to determine the enforceability of the termination clause and to strike the claim as disclosing no tenable cause of action.

Justice Chiappetta described the Baker framework as “a welcomed departure from the technical and inherently imperfect exercise of comparing termination provisions from case to case” with a new emphasis on the objective intention of the parties to comply with minimum standards legislation. Applying that framework, the Court rejected the plaintiff’s argument for several reasons:

• The Court accepted that the plaintiff’s reading “may be a plausible interpretation” if the words were read literally and in isolation, but held that ending the analysis at that point would be premature. Following Baker, the question is what the parties objectively intended based on the text and surrounding circumstances;
• The rules and regulations provision stated that a breach “will be cause for severe discipline and/or termination,” with the reference to “or” meaning not every breach of confidentiality would result in termination for cause;
• The rules and regulations provision and the termination clause were properly read together, such that any termination for breach of confidentiality would have to be for a lawful reason and would attract the CLC minimums; and
• The plaintiff was an experienced lawyer who would not have intended the confidentiality language to strip her of her statutory rights, and BFN could not reasonably have intended to create an inconsistency with the CLC given the clear language of its termination clause.

The Court also distinguished recent case law relied upon by the plaintiff as not as having considered enforceability through the lens of Baker, and instead engaging in an analysis focussed on a possible interpretation rather than the objectively intended result.

The Court determined that the employment agreement was enforceable, with the termination provisions reflecting an intention that the plaintiff would receive all entitlements under the CLC.

The Court also held that the plaintiff was not entitled to moral or punitive damages. The claim for punitive damages was dismissed on the basis that the claim did not establish an independent actionable wrong. The Court recognized that an enforceable employment agreement does not preclude a claim for moral damages, with such damages being awardable as a separate amount to compensate for mental distress caused by an employer’s conduct during the dismissal process. However, BFN’s conduct did not rise to the level required to support such claim, as the pleadings failed to address the manner of termination.

Takeaway

In Henshell, phrases such as “for any lawful reason” and express references to statutory notice and severance entitlements were central to the Court’s finding of an objective intention to comply with minimum standards legislation. This is consistent with Baker, where a broad “just cause” definition was upheld because it explicitly preserved minimum statutory entitlements.

Henshell is one of the first decisions to apply Baker, and the result is encouraging for employers, both at the provincial and federal level. Baker‘s contextual approach is being applied broadly. Courts are reading the employment agreement as a whole, rather than allowing a single phrase in an unrelated provision to invalidate an otherwise compliant termination clause.

While Henshell provides a reason to be optimistic, this optimism must be exercised cautiously as we continue to monitor legal developments in light of Wigdor v Facebook Canada Ltd., 2026 ONCA 572 (“Wigdor”). Wigdor, released just one day after the Baker decision, provides a stricter analytic framework encouraging a technical interpretation of statutory and contractual language. Our commentary on Wigdor and its tension with Baker can be found here, but we will continue to consider the competing frameworks and how they may be reconciled in future legal developments.