Introduction

Three recent Ontario court decisions offer employers a welcome shift and much-needed insight into the types of termination provisions that will withstand judicial scrutiny. The following summary outlines the key takeaways from these cases and what employers should keep in mind when drafting or updating their employment and compensation agreements.

Context: Dufault and the uncertainty around termination clauses

Many employers will recall the 2024 decision in Dufault v. The Corporation of the Township of Ignace, where the Ontario Superior Court held that a termination provision giving the employer the right to terminate employment “at any time” and in its “sole discretion” was contrary to Ontario’s Employment Standards Act, 2000 (“ESA”), and therefore unenforceable. This led to significant concern among employers, particularly after Baker v. Van Dolder’s Home Team Inc. appeared to apply Dufault even in the absence of “sole discretion” language.  The Court’s decision in Baker is currently under appeal.

Against that backdrop, three recent decisions provide helpful guidance.

Three employer-friendly clarifications

Jones v. Strides Toronto Support Services, 2025 ONSC 2482 (“Jones”)

In Jones – much like in Baker – the Court addressed whether a “without cause” termination provision was unenforceable because it permitted termination “at any time.”

In contrast to Baker, Justice Moore explicitly distinguished Dufault and held that “the Dufault decision does not stand for the proposition that the words ‘at any time’ divorced from ‘sole discretion’ are improper in an employment contract. I do not find that these words in the termination clause in this case bring it into conflict with the ESA and make it unenforceable.”

While the termination provision was ultimately invalidated on other grounds, this decision provides assurance that the mere presence of the phrase “at any time” in a termination provision will not automatically render the clause unenforceable.

Notably, the decision does not address Baker. However, Baker has been appealed to the Ontario Court of Appeal, which may present an opportunity for these decisions to be reconciled.

Li v. Wayfair Canada ULC., 2025 ONSC 2959 (“Li”)

In Li, the impugned “without cause” termination provision not only purported to permit termination “at any time,” but also “for any reason.” Nevertheless, Justice Dow distinguished Dufault, noting that the without cause termination provision before the Courtclearly and repeatedly indicated that payments would be made as “required by” or “under” the ESA, in contrast to Dufault, where the without cause provision had “failed to provide for all types of wages such as vacation pay or sick days.”

The Court also held—without elaborating—that the wording of the termination provision in Baker was distinguishable and so a different conclusion was warranted.

Wigdor v. Facebook Canada Ltd., 2025 ONSC 4861 (CanLII) (“Wigdor”)

In Wigdor, the applicant employee raised Dufault and Baker in an attempt to invalidate limiting language in a series of RSU (Restricted Stock Unit) agreements. The agreements contained provisions stating that the RSUs would be forfeited upon termination even if the employee’s termination was “later found to be invalid or unlawful.”

The employee argued that since there are circumstances in which the ESA prohibits termination, by purporting to remove part of an employee’s rights to compensation even in the context of an unlawful termination, the limiting language ought to be rendered void as an attempt to contract out of the ESA.

Justice Leiper rejected this argument, holding that Dufault and Baker deal with employment agreements, not separate compensation agreements, and the applicant’s contractual entitlements were independent of any relief he may have been entitled to receive under his employment agreement, the ESA, or the common law.

While it isbeyond the scope of this article, Wigdor will also be of interest to employers for the Court’s determination that RSUs are not “wages” or “benefits” under the ESA. The Court held that while an employer who provides pay in lieu of notice of termination must continue to make contributions to the employee’s benefit plans (such as health, dental, and life insurance benefits) during the statutory notice period, employees are not entitled to the continued vesting of equity compensation such as stock options or RSUs over that period.

Key takeaways for employers

  • The phrase “at any time” without accompanying “sole discretion” language does not necessarily invalidate a termination clause in an employment agreement.
  • Clauses that expressly and repeatedly reference compliance with the ESA are more likely to be upheld.
  • In some situations, courts will not entertain a Dufault-style challenge to equity compensation agreements.
  • The impending Baker appeal presents an opportunity for further guidance, and employers should continue to monitor developments and review their templates in the interim.

Conclusion

Jones and Li provide welcome confirmation that the presence of the phrase “at any time” is not necessarily fatal to the enforceability of a termination provision. In the absence of “sole discretion” language and if the agreement otherwise incorporates a clear intention to comply with ESA requirements, such a clause may well be enforceable. Wigdor further limits Dufault’s reach by refusing to extend the reasoning in Dufault to compensation agreements that are separate from the employment contract itself.

Uncertainty persists, however. In a decision released on August 6, 2025, Chan v. NYX Capital Corp., the Court followed Dufault and Baker in holding that a clause which purported to allow termination “at any time and for any reason” was unenforceable. The Court did not address Jones or Li in its reasons.

The pending appeal in Baker should provide additional clarity on these issues and may reconcile the divergence in the case law.

Employers may wish to proactively review their employment and compensation agreements in light of these recent decisions. We encourage you to contact a member of Miller Thomson’s Labour and Employment team if you or your organization has any questions or if you require assistance in updating your organization’s employment agreements. We will continue to monitor and provide updates on developments in this area as they occur.