Ontario Court of Appeal endorses practical and common sense approach to the interpretation of termination provisions, upholding the enforceability of termination 'at any time' and 'for any reason'

At a glance

• The Ontario Court of Appeal (Court) has confirmed in Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568 (Baker) that contractual termination provisions must be interpreted using a practical and common-sense approach, rather than by focusing on hypothetical violations of employment standards legislation.
• The Court held that wording allowing termination 'at any time' or 'for any reason' does not, by itself, contravene the Ontario Employment Standards Act 2000 (ESA), and can be enforceable when read in the context of the agreement as a whole.
• The Court found that the disputed termination provisions in both Baker v Van Dolder's Home Team Inc., 2025 ONSC 952 and Li v. Wayfair Canada ULC. were enforceable because they preserved employees' statutory minimum entitlements under the ESA.
• The decision confirms that employers are not required to define every ESA entitlement within a termination clause or expressly explain the distinction between common law 'just cause' and ESA 'wilful misconduct' for a clause to remain enforceable.
• The ruling represents a significant development in Canadian employment law and may reduce challenges to termination clauses that arose following the 2024 Dufault v The Corporation of the Township of Ignace, 2024 ONSC 1029 (Dufault) decision.

---

Since February 2024, employers across Canada have faced a barrage of challenges to the enforceability of contractual termination provisions that purportedly gave employers the right to terminate the employment relationship 'at any time' or 'for any reason', largely based on the decision in Dufault.

In Baker, the Court dismissed these challenges to enforceability, endorsing a 'practical' and 'common sense' approach to the interpretation of contractual termination provisions.

Background

The Court in Baker heard two appeals together, both of which involved challenges to, among other things, the inclusion of the words 'at any time' or 'for any reason' in contractual termination provisions.

The first appeal – Baker v Van Dolder’s Home Team Inc., 2025 ONSC 952

The termination provisions at issue stated:

'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. If any additional payments or entitlements, including but not limited to making contributions to maintain your benefits plan, are prescribed by the minimum standards of the Employment Standards Act at the time of your termination, we will pay same. The provisions of this paragraph will apply in circumstances which would constitute constructive dismissal.

…

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…

[Emphasis Added]'

On a motion for summary judgment, the motion judge held that both termination provisions were unenforceable, including because:

• The 'without cause' provision purportedly allowed the employer to terminate 'at any time', which conflicted with protections under the Ontario Employment Standards Act 2000 (ESA) that preclude termination in certain circumstances, including at the end of an employee’s leave of absence or as a reprisal for an employee exercising a right protected under the ESA.
• The 'with cause' provision did not sufficiently distinguish between the standard of 'just cause' at common law and the standard of 'wilful misconduct' under the ESA to deny an employee’s entitlement to notice of termination (or pay in lieu thereof).

The second appeal – Li v. Wayfair Canada ULC., 2025 ONSC 2959

The termination provision at issue stated:

'After your probationary period concludes, in the absence of Cause, the Company may terminate your employment at any time and for any reason by providing you with only the minimum statutory amount of written notice required by the ESA or by paying you the minimum amount of statutory termination pay in lieu of notice required by the ESA, or a combination of both, as well as paying statutory severance pay required by the ESA, providing benefits continuance for the requisite minimum statutory notice period under the ESA and all other outstanding entitlements, if any, owing under the ESA. These payments and benefits shall fully satisfy all of the Company’s notice, severance and benefits continuance obligations upon the termination of your employment, whether arising under the ESA, the common law or this Agreement, and you agree you shall have no further entitlements unless expressly required by the ESA. In no event will you receive less than your statutory minimum entitlements under the ESA. [Emphasis Added]'

On a motion for summary judgment, the motion judge held that the termination provision was enforceable, including because, when read as a whole, the underlying employment agreement led to the conclusion that the employer was only seeking to:

• Exclude the employee’s right to common law damages.
• Limit the employee’s entitlements on termination to the minimums required by the ESA.

Decision of the Court

Writing for a unanimous panel, Justice Monahan allowed the appeal in Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, and dismissed the appeal in Li v. Wayfair Canada ULC., 2025 ONSC 2959, finding that all three termination provisions were enforceable, unambiguous and consistent with the requirements of the ESA.

Interpretive framework

The Court confirmed that an employment agreement is to be read as a whole and interpreted having regard to all of the surrounding circumstances.

The Court endorsed a practical, common-sense approach to contractual interpretation, which focuses on the objective intention of the parties and what they reasonably understood their words to mean, rather than straining to find ambiguity in every theoretical and hypothetical scenario.

The Court confirmed that genuine ambiguity exists only where there are multiple reasonable but differing interpretations considered in the context of the entire employment agreement.

'At any time' and 'for any reason' language is consistent with ESA

Applying the above framework, the Court held that:

• The words 'at any time' are consistent with the ESA and simply reflect the parties’ mutual intention that the termination provision would be valid and enforceable, regardless of when termination occurs.
• The words 'for any reason' are consistent with the ESA and simply mean that the employer is not required to give the employee a reason for terminating the employment relationship.

The Court also emphasised that, reading the employment agreements as a whole, the parties could not have intended to deprive the employees of their entitlements under the ESA, including by attempting to consensually contract out of minimum ESA entitlements.

'With cause' provision in Baker is consistent with the ESA

The Court similarly held that the 'with cause' provision in Baker wasenforceable because it expressly preserved the employee’s right to receive any applicable ESA entitlements even if the employment relationship was terminated for 'just cause' at common law.

The Court also confirmed that referentially incorporating the ESAinto termination provisions without spelling out every entitlement in detail does not create ambiguity, nor is there any obligation to define the difference between the standard of 'just cause' at common law and the standard of 'wilful misconduct' under the ESA.

Conclusion

The practical and common-sense approach to the interpretation of termination provisions endorsed by the Court in Baker is a welcome development for employers who have been defending bandwagon challenges to the enforceability of termination provisions for many years, including since the decision in Dufault.

Employers with ongoing disputes relating to the enforceability of termination provisions should contact one of the lawyers in the Employment and Labour Law Group at DLA Piper to discuss how the decision in Baker may have fundamentally shifted the landscape.