In a decision that will be welcomed by Ontario employers, the Court of Appeal for Ontario has resolved an area of uncertainty in the law governing the enforceability of termination provisions in employment agreements. In Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568, the Court held that the phrases “at any time” and “for any reason” do not, without more, render a termination provision void under the Employment Standards Act, 2000 (the “ESA”). The Court also upheld the with-cause provision in the employee’s contract and found that it was consistent with the ESA.
Baker provides employers with much-needed guidance on the enforceability of termination provisions in employment agreements. In recent years, a line of lower court decisions had called into question the enforceability of termination provisions containing such language, creating considerable uncertainty for employers who had relied on these common formulations in their employment agreements.
Background: The Decisions Under Appeal
Baker arose from the appeal of two lower court decisions involving very similar contractual language concerning an employer’s right to terminate employment “at any time,” where the courts reached opposite conclusions.
In Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, Frederick Baker was employed pursuant to an employment agreement that permitted the company to terminate his employment without cause “at any time” upon providing only the minimum ESA entitlements. On a motion for summary judgment, the motion judge found the termination provision unenforceable, reasoning that the phrase “at any time” was inconsistent with ESA provisions that prohibit termination in certain circumstances (e.g. s. 53, regarding reinstatement after leave, and s. 74, regarding reprisals).
The motion judge also found that the “with cause” provision in Mr. Baker’s employment agreement rendered the termination provision unenforceable. The provision stated that Mr. Baker’s employment could be terminated “at any time for just cause” without notice except any minimum compensation prescribed by the ESA. The motion judge found the with cause provision unenforceable on the basis that it failed to guarantee that Mr. Baker would receive his entitlements under the ESA in the event he engaged in conduct that amounted to “just cause” at common law but did not meet the ESA’s heightened standard for a without-notice termination i.e. wilful misconduct, disobedience or wilful neglect of duty that is not trivial and not condoned by the employer. The employer appealed the motion judge’s decision.
In Li v. Wayfair Canada ULC, 2025 ONSC 2959, Song Li was employed as a Senior Product Manager pursuant to an employment agreement that permitted the company to terminate his employment without cause “at any time and for any reason,” while stating that only the minimum statutory entitlements under the ESA would be provided. The motion judge in that case upheld the provision as enforceable. The employee appealed the decision.
The Court of Appeal heard the appeals together to resolve the conflicting lower court jurisprudence.
The Court of Appeal’s Analysis: Objective Intention of the Parties
Writing for a unanimous panel, Justice Monahan emphasized that interpreting a termination provision in an employment agreement is fundamentally an exercise in contractual interpretation. The overriding concern is to ascertain the objective intention of the parties, considering both the words used and the surrounding circumstances.
The Court held that a literal reading of the words “at any time” or “for any reason”, divorced from context, is inconsistent with the modern approach to contractual interpretation endorsed by the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, and Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc., 2024 SCC 20. The Court held that courts must avoid a “magic words” approach where the use of certain language in isolation determines the enforceability of a provision.
Without Cause Provisions Upheld
Applying this framework, the Court found that the parties could not reasonably have intended the words “at any time” or “for any reason” to entitle the employer to terminate in circumstances expressly prohibited by the ESA and other legislation in Ontario that establishes minimum standards, such as the Human Rights Code and the Occupational Health and Safety Act. Several contextual factors supported this conclusion:
- No party intended to breach statutory protections. The Court found that the contracting parties in both Baker and Li did not intend the termination provisions to override statutory protections in the ESA. The Court held this should be a driving factor in interpreting whether the agreements were an attempt to contract out of, and were therefore void under, the ESA. The Court made specific reference to the fact that the motion judge in Baker acknowledged that the employer “intended only to comply with the ESA.”
- Such an interpretation would be self-defeating. The Court found that the purpose of the without cause termination provisions in Baker and Li was to rebut the common law presumption of reasonable notice. Focusing on the parties’ intentions, the Court reasoned that if the “at any time” language rendered the without cause termination provision void, this would negate the employer’s purpose in including the provision in the first place.
- The agreements as a whole confirmed intention to comply with the ESA. In Baker, the agreement contained a “Minimum Standards” provision (commonly known as a “saving provision”) expressly committing the employer’s intention to comply with the ESA “at all times.” Similarly in Li, the without cause provision stated in several provisions that payments would be made as “required by” or “under the ESA,” and expressly stated that the employee would “in no event … receive less than your statutory minimum entitlements under the ESA.” The Court held that these express commitments to comply with the ESA must inform the interpretation of the termination provisions stating that employment may be terminated “at any time” and “for any reason”.
The Court concluded that the words “at any time” in the context of these agreements reflected a mutual intention that a without cause termination will be valid and legally effective regardless of when it occurs, not that the employer may disregard statutory prohibitions. Similarly, “for any reason” simply meant the employer was not required to provide a reason in support of a termination without cause, consistent with the long-established principle affirmed by the Supreme Court of Canada in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701. The Court found that the without cause provisions did not violate the ESA.
With Cause Provision Also Upheld
The Court also overturned the motion judge’s finding in Baker that the with cause provision was unenforceable. Although the agreement defined “just cause” more broadly than the ESA standard of “wilful misconduct,” the provision expressly preserved Mr. Baker’s entitlement to “any minimum compensation or entitlements prescribed by the Employment Standards Act.” The Court held this language aligned the provision with the ESA, as Mr. Baker would receive his statutory minimum entitlements unless his conduct met the higher threshold of wilful misconduct. The motion judge’s concern that “regular employees” might misunderstand the provision was not a proper basis for invalidating an otherwise unambiguous provision.
Key Takeaways for Employers
The Court of Appeal’s decision in Baker provides much needed clarity that an employment agreement stating that an employee’s employment may be terminated “at any time” or “for any reason” does not, in itself, invalidate the employment agreement in Ontario. The Court expressed favour towards a contextual assessment of employment language that avoids focusing on the impact of certain terms in isolation. The Court’s assessment that “[w]ith respect, [the motion judge’s] analysis strained to find an ambiguity where none existed” should serve as a cautionary warning to employees and their lawyers that the courts will no longer be receptive to such arguments as a basis to invalidate a termination provision.
Employers should not lose sight of the importance the Court placed on the parties’ objective intention in determining whether an agreement is enforceable. Because Baker involved a contextual analysis of both agreements in their entirety, the decision emphasizes the value of drafting employment agreements that signal a clear and recognizable intention to comply with minimum employment standards. It also illustrates the benefit of careful drafting informed by legal expertise.
This article is intended to provide general information only and does not constitute legal advice. If you have questions about how this decision may affect your employment agreements, please contact a member of our Employment & Labour Group. The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice.
