As readers of our blog will be aware, employment lawyers have been anticipating the Court of Appeal for Ontario’s hearing of two notable 2025 cases, Baker v Van Dolder’s Home Team Inc. (“Baker”) and Li v Wayfair Canada ULC (“Li”), which address the enforceability of termination clauses. The appeals, originally set to be heard on January 16, 2026, have been adjourned to March 25, 2026, where they will be heard simultaneously with an undisclosed third matter.
What Does This Mean?
Our hope is that the Court of Appeal will settle the issue of whether including the wording that an employee’s employment can be terminated “at any time” is fatal to the enforceability of a termination clause. This adjournment means we will have to wait a bit longer to receive guidance from the court on this issue.
Why Does This Matter?
We currently have conflicting judicial decisions in Ontario on this issue, which creates significant uncertainty for both employers and employees.
Language suggesting that an employment relationship could be terminated “at any time” was previously fairly common in termination clauses, which means that a lot of clauses contain this potential vulnerability. Where a termination clause is found to be unenforceable, an employee will be entitled to reasonable notice at common law, which is typically far more substantial than what the contract would have provided.
The current uncertainty complicates dismissal planning for employers and makes it challenging for parties to assess the viability of settlement or litigation.
How Did We Get Here?
We provided a detailed overview of the case law in our last update on this topic. Essentially, this issue first arose in 2024, when the Ontario Superior Court of Justice in Dufault v. The Corporation of the Township of Ignace (“Dufault”) ruled that including wording indicating that the employment relationship could be terminated “at any time” and in an employer’s “sole discretion” breached the requirements of the Ontario Employment Standards Act, 2000 (the “ESA“) and invalidated the termination clause.
However, since Dufault, we have had conflicting decisions on the impact of the inclusion of “at any time” language on the enforceability of a termination provision. The court in Baker followed the reasoning in Dufault, striking out a termination clause for including this language. In contrast, the court in Li (decided after Baker) departed from Dufault, finding that this language alone was not sufficient to breach the ESA and invalidate the termination clause.
Where Do We Go From Here?
We anticipate the Court of Appeal for Ontario will provide clarity on this issue once the appeals are heard on March 25, 2026. We will continue to monitor developments and provide updates on our blog.
In the meantime, we offer strategic advice to help navigate this uncertainty:
- For Employees: We can assess the termination clause in your employment agreement, advise you as to your entitlements, and provide you with our recommended approach.
- For Employers: We can review your employment agreements, provide you with our opinion on the enforceability of your termination clause, and advise with respect to any planned dismissals or wrongful dismissal claims. We can also assist you to update your agreements and termination clauses to ensure that they remain enforceable.
For further background, see these related posts.
