Construing Objective Intention in a Termination Provision

For the past two years in Ontario, termination provisions have turned on three words. Two judges of the Superior Court of Justice, examining near-identical wording, reached opposite conclusions about whether permitting an employer to terminate “at any time” made a without-cause provision void for inconsistency with the Employment Standards Act, 2000, S.O. 2000, c. 41 (the ESA). The Court of Appeal for Ontario resolved that conflict in Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568, heard together with Li v. Wayfair Canada ULC. Monahan J.A., writing for a unanimous panel, held both provisions enforceable.

The facts

Frederick Baker began work as Controller, Head of Finance at Van Dolder’s Home Team Inc. on November 2, 2020, at $95,000 a year. His contract permitted the employer to terminate his employment “at any time, without just cause,” on providing only the minimum notice, pay in lieu, and severance pay required by the ESA. A separate clause, headed “The Minimum Standards of the Employment Standards Act to Prevail,” committed the employer to comply with the ESA at all times and provided that the statute would prevail over any inconsistent term. Mr. Baker was dismissed without cause on March 24, 2023, at age 71, with a statutory entitlement of two weeks under s. 57(b). Offered four weeks in exchange for a release, he declined and sued.

Song Li began work as a Senior Product Manager at Wayfair Canada ULC on January 23, 2023, at $221,546 a year. His contract permitted termination without cause “at any time and for any reason,” and then tied his entitlements to the statute five separate times, closing with an assurance that he would in no event receive less than his statutory minimum. He was dismissed without cause on October 17, 2023, with a statutory entitlement of one week under s. 57(a).

On summary judgment, Sproat J. held both of Mr. Baker’s termination provisions void (2025 ONSC 952), following the Superior Court’s decision in Dufault v. The Corporation of the Township of Ignace on the “at any time” question, and finding the with cause provision unenforceable for failing to explain the statutory wilful misconduct standard to an ordinary employee. On a separate summary judgment motion, Dow J. held Mr. Li’s provision enforceable (2025 ONSC 2959), reasoning that the contract read as a whole tied every entitlement to the statute.

The Court of Appeal allowed the employer’s appeal in Baker and dismissed Mr. Li’s appeal, at para. 5. Both contracts, on the Court’s reading, expressed an objective intention to provide the statutory minimum and nothing more.

The governing interpretive principles

The framework the Court set out draws together two lines of authority.

The first is protective. An employment contract has characteristics that set it apart from an ordinary commercial contract, including the importance of work to a person’s dignity and the pronounced imbalance in bargaining power: Wallace v. United Grain Growers Ltd., at para. 91, cited at para. 28. Employees are most vulnerable at the point at which the relationship ruptures: Wallace, at para. 95. Where a termination clause can reasonably be read in more than one way, courts prefer the reading that gives the greater benefit to the employee: Wood v. Fred Deeley Imports Ltd., at paras. 20, 28, cited at para. 29, drawing on Machtinger v. HOJ Industries Ltd..

The second is interpretive. Determining the meaning of an employment contract remains an exercise in contractual interpretation, governed by the objective intention of the parties in light of the words used and the surrounding circumstances: Sattva Capital Corp. v. Creston Moly Corp., at para. 47, cited at para. 30. Courts are to avoid a “magic words” approach under which a phrase considered in isolation determines the legal effect of a provision: Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc., at para. 98, cited at para. 31. Genuine ambiguity arises only where two or more reasonable interpretations survive a reading of the whole contract, and courts should not strive to find ambiguity where none reasonably exists: para. 32, citing Amberber v. IBM Canada Ltd., at paras. 43 to 45.

The reconciliation the Court proposed is that the protective principle operates on genuine ambiguity, and not before it. Applying that, the Court identified the motion judge’s error in Baker with precision. The motion judge made no finding that the parties intended the words “at any time” to authorize a dismissal the statute forbids, and neither party advanced that position, at para. 38. He fastened instead on the possibility of reading the words that way, and treated the possibility as fatal, at para. 39.

Two consequences follow from rejecting that approach. Reading the words to permit unlawful dismissal would defeat the purpose of the provision, which is to rebut the presumption of common law reasonable notice, since a provision read that way is void, at para. 43. It would also expose the employer to consequences considerably heavier than reasonable notice, at para. 44. The remedy for a dismissal contrary to s. 53 or s. 74 of the ESA is reinstatement, or a make-whole order placing the employee in the position they would have occupied had the breach not happened, and s. 132 makes such a dismissal an offence carrying a fine of up to $100,000, imprisonment of up to 12 months, or both. No employer, on the Court’s reasoning, intends to purchase that exposure through a standard drafting phrase.

The words themselves were then given a settled meaning. “At any time” confirms that a without cause termination is legally effective regardless of when it occurs, at para. 47, an understanding consistent with Iacobucci J.’s treatment of the same phrase in Wallace, at paras. 49 to 50. On “for any reason,” the Court was explicit:

“The words ‘for any reason’ simply mean that a termination will be consistent with the contract and therefore legally effective regardless of the reason for the termination.”

The with cause provision in Mr. Baker’s contract survived on a narrower footing. Its definition of just cause was broader than the statutory standard of wilful misconduct, which in the Court of Appeal’s earlier decisions has been fatal: Dufault v. The Corporation of the Township of Ignace, at para. 22; De Castro v. Arista Homes Limited; Rahman v. Cannon Design Architecture Inc., discussed at para. 70. What saved Mr. Baker’s provision was a proviso preserving any minimum compensation or entitlements prescribed by the ESA even where the contractual standard of cause is met, at para. 73. That standard of wilful misconduct, described as conduct that is bad on purpose, is a higher threshold than just cause at common law: Render v. ThyssenKrupp Elevator (Canada) Limited, at paras. 79 to 80, and O. Reg. 288/01, ss. 2(1)3 and 9(1)6. Employers may incorporate statutory entitlements by reference without explaining them, at para. 79.

The continuing force of the statutory prohibitions

The reasoning that saved these clauses depends on the continued force of the statutory prohibitions. The Court held that no reasonable employer would intend to contract for a right to dismiss unlawfully, precisely because dismissing unlawfully carries reinstatement, make-whole orders, and prosecution. That holding assumes those protections remain fully operative, and it says so: there are potentially dozens of provisions in the ESA, the Occupational Health and Safety Act, the Human Rights Code, and other remedial statutes that protect employees from dismissal at particular times or in particular circumstances, at para. 41.

The Court also drew a distinction that matters to how those protections work. The prohibitions in ss. 53 and 74 of the ESA are not absolute, and they are directed at the employer’s reasons rather than at timing alone, at para. 58. Section 53(2) permits a dismissal at the conclusion of a statutory leave where the employment is ended solely for reasons unrelated to the leave. Sections 74(1)(a) and (b) prohibit a dismissal where the employer acts because the employee exercised a right under the Act. An employee dismissed on the last day of a parental leave has no claim from the calendar alone. The claim, where there is one, is about why.

Neither appeal raised a claim that the dismissal itself was prohibited. Mr. Baker and Mr. Li each argued only that the wording of the provision offended the statute, and the Court decided only that question. An employee whose dismissal was a reprisal for asserting a statutory right, or was connected to a leave, or was based on a ground protected by the Human Rights Code, has a claim that the enforceability of the termination provision does not affect and cannot defeat. The claim is advanced under the statute, before an employment standards officer, the Ontario Labour Relations Board, or the Human Rights Tribunal of Ontario, rather than in a wrongful dismissal action in the Superior Court. Different forum, different remedy, different time limits, and in the case of an ESA complaint about termination pay, a choice: ss. 97 and 98 of the ESA prevent an employee from pursuing the same entitlement in both places.

Waksdale v. Swegon North America Inc. remains untouched as well. Van Dolder asked the Court to convene a five-judge panel to reconsider the rule that one non-compliant termination provision invalidates the rest. The Associate Chief Justice denied the request, and the panel declined to reach the argument, since every provision before it complied with the statute, at paras. 81 to 82. The rule survives with its practical reach reduced, since fewer provisions will now be found non-compliant in the first place.

The sequence a termination question now follows

After this decision, a dismissal is analyzed in the following order.

The first question is whether the contract, read as a whole, expresses an objective intention to limit entitlement to the statutory minimum. Repeated references tying payments to the ESA, and a clause committing the employer to comply with the statute, are the contextual markers the Court relied on in both contracts, at paras. 45 to 46 and 54 to 55.

If the answer is yes, the presumption of common law reasonable notice is rebutted, and the entitlement is the statutory floor. If a termination provision genuinely fails, for example a with cause provision denying all compensation for conduct falling short of wilful misconduct, Waksdale still brings down the termination scheme as a whole and the common law notice period returns.

The second question is separate and survives the first regardless of its answer. Was this dismissal one the statute prohibits? A provision that is enforceable in every respect does not authorize a reprisal and does not permit a dismissal because an employee took leave or belongs to a protected group.

The wording of the provision determines how much notice is owed. The employer’s conduct determines whether the dismissal was lawful at all.

An application for leave to appeal to the Supreme Court of Canada may be filed within 60 days of the judgment under s. 58(1)(a) of the Supreme Court Act, subject to the extension under s. 59(1). The decision binds Ontario courts unless it is stayed or reversed.