For years, Ontario employers have watched termination clauses fall apart over a few words. A phrase that appeared harmless when the contract was signed could later expose the employer to months of common-law notice.

The Ontario Court of Appeal has now brought some welcome common sense to the issue.

While many commentators have correctly read the Court of Appeals judgment in Baker and Wayfair as a win for employers, the ability to enforce employment contracts depends completely on careful drafting. In our experience, proper drafting or, in many cases, having a current employment contract remains the exception, not the rule. Employers should engage a qualified employment lawyer to review their contracts annually or whenever changes in the law affect them.

In Baker v. Van Dolder’s Home Team Inc. and Li v. Wayfair Canada ULC., 2026 ONCA 568, the Court upheld the termination clauses in both employment contracts, reducing the termination payments from months to weeks. The decision confirms that courts should read a contract as a whole, not search for an unlikely interpretation of a few isolated words.

That is good news for employers. But it is not a licence to keep using an old contract without reviewing it. The enforceability of a termination clause still relies on the precise wording of its provisions and whether they meet all the minimum requirements of the Employment Standards Act, 2000 (“ESA”). Employers should avoid interpreting Baker and Wayfair as endorsements for every termination clause that includes a general ESA saving provision.

“At Any Time” Does Not Mean “Above the Law”

The contracts in both cases contain wordings that the employers may terminate employment “at any time” or “at any time and for any reason.” The employees argued that this language was illegal because Ontario law prohibits termination at certain times or for certain reasons, including reprisals and some dismissals connected to protected leaves.

The Court rejected that argument.

Read in context, the words did not give the employers permission to break the law. They simply meant that employers could terminate the employment relationship without proving cause or providing a reason, as long as they complied with the contracts and all applicable legislation.

The Contract Must Still Protect Every ESA Minimum

Why did these clauses survive?

A contractual right to terminate is always subject to the ESA, human rights legislation, workplace safety laws, and other statutory protections. Verbiage such as “at any time and for any reason” does not necessarily mean violation of applicable legislation.

The Court ruled that termination clauses should be read within the context of the contract as a whole. Both contracts repeatedly confirmed that employees would receive at least their minimum ESA entitlements, and the Court found it implausible that the parties intended “at any time” or “for any reason” to permit an illegal dismissal when the contracts expressly required ESA compliance.

The practical point is straightforward: Broad termination language may be enforceable, but only when the contract, when read as a whole, provides no less than the ESA requires.

Dufault Survives, but Its Reach Is Narrower

The Court mentioned Dufault v. Ignace (Township), 2024 ONCA 915, but did not comment on the wording of “at its sole discretion”.

However, reading Dufault against Baker and Wayfair, it is not difficult to conclude the Court’s view that similar language, such as termination “at its sole discretion”, is not automatically fatal.

The Court also confirmed that a contract may refer to ESA entitlements without reproducing the statute or explaining every difference between common-law cause and ESA wilful misconduct.

Review Now or Pay Later

Baker and Wayfair should reduce challenges based on the isolated readings of phrases such as “at any time,” “for any reason,” or “at its sole discretion.” That is a meaningful development for employers.

However, the decision does not make careful drafting optional. The enforceability of a termination clause still depends on the wording of the entire contract and on whether it protects all ESA minimums. Employers should resist the temptation to read Baker and Wayfair as approval of every termination clause containing a general ESA saving provision.

For instance, the Court addressed the difference between just cause at common law and wilful misconduct under the ESA. An employee’s conduct may be serious enough to justify dismissal without common-law notice yet still fall short of the ESA’s higher wilful-misconduct standard. In that situation, the employee may still be owed ESA notice, continuation of benefits, and severance pay. This was the problem in Dufault, where the “termination for cause” clause denied all payments for conduct that could fall below the ESA standard and, therefore, is unenforceable.

Also, courts examined the full wording of each agreement. Waksdale remains good law in Ontario, which means that a single unlawful part of a termination provision can invalidate the entire provision in the same contract.

Ontario termination law continues to change. A clause drafted several years ago may no longer provide the protection the employer expects.

Employers should therefore regularly review templates before using them for new hires, promotions, or major changes to employment. A brief contract review today may avoid a much larger wrongful dismissal payment tomorrow.