2025 was another eventful year in employment law. As in previous years, the enforceability of termination clauses continued to dominate the courts’ time, but a more balanced approach to these clauses emerged over the past year. We also saw our courts address the duty to mitigate, pre-employment inducement, and—right before the holidays—clawback clauses, giving practicitioners in this area clear guidance on these issues. The following are the top Ontario employment law decisions of 2025.

1. Termination clauses

Uncertainty surrounding termination clauses in employment contracts continued in 2025. The top termination clause decisions of 2025 can be divided into three categories.

The first category includes decisions that continued to support the trend that the phrases “at any time” and “at [the employer’s] sole discretion,” when used in a termination clause, render the clause unenforceable.

In Chan v. NYX Capital Corp., 2025 ONSC 4561 the Ontario Superior Court of Justice (the “Superior Court”) found that the “without cause” termination clause in the employment contract was unenforceable because it provided for termination “at any time and for any reason.” The Superior Court relied on its decision in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029 (“Dufault”) to conclude that this language attempted to contract out of the Employment Standards Act, 2000 (the “ESA”), rendering it invalid.

In Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 (“Baker”) the Superior Court found that the “without cause” termination clause was unenforceable because it reserved the employer’s right to terminate employment “at any time” while providing the employee only with their entitlements under the ESA.

The second category of 2025 termination clause decisions includes those that concluded the phrase “at any time” does not, on its own, necessarily lead to the unenforceability of termination clause. In Jones v. Strides Toronto Support Services, 2025 ONSC 2482 the Superior Court held that the mere presence of the phrase “at any time” in a termination clause, without the accompanying language referring to the employer’s sole discretion, does not automatically render the clause unenforceable.

Similarly, in Li v. Wayfair Canada ULC., 2025 ONSC 2959 (“Li”), the “without cause” termination clause provided that employment may be terminated “at any time” and “for any reason,” so long as ESA statutory minimums were paid. The “with cause” termination clause also provided that employment may be terminated “at any time” without pay, unless expressly required by the ESA. The Superior Court found that both termination clauses were enforceable and distinguished Dufault on the basis that both clauses in Li clearly indicated that statutory payments would be made to the employee upon termination.

The third category of 2025 termination clause decisions included those that specifically addressed the enforceability of “with cause” termination clauses. In De Castro v. Arista Homes Limited, 2025 ONCA 260 (“De Castro”) the “just cause” termination clause defined “cause” more broadly than under the ESA by stating that the employee would not receive pay if their employment was terminated for cause or for wilful misconduct, disobedience, or wilful neglect of duty. Although the employee in De Castro was terminated without cause, the Court found that the “with cause” provision was unenforceable, thereby rendering the entire termination scheme in the contract unenforceable.

On appeal, the Ontario Court of Appeal (the “Court of Appeal”) upheld the motion judge’s decision and agreed that the contract defined “cause” more broadly than the ESA, which rendered all termination clauses in the contract unenforceable.

Last year, in Bertsch v. Datastealth Inc., 2024 ONSC 5593, the Superior Court upheld a termination clause that limited the employee’s entitlement upon termination of employment, with or without cause, to the statutory minimums prescribed by the ESA. That decision was appealed.

In 2025, in Bertsch v. Datastealth Inc., 2025 ONCA 379, the Court of Appeal agreed with the Superior Court that the clause was clear, unambiguous, and could only be interpreted to mean that ESA minimums would be paid in all cases, where applicable. The Superior Court’s decision was therefore upheld.

2. The duty to mitigate

In an unusual win for employers, the Superior Court discounted a reasonable notice period due to the employee’s failure to produce a document to show mitigation earnings. In Boyle v. Salesforce.com, 2025 ONSC 2580, the employee’s employment was terminated after eight years of service. The Superior Court awarded the employee 11 months of reasonable notice. The employer argued that the reasonable notice period should be reduced by three months due to the employee’s failure to mitigate his damages during the notice period, noting that the employee submitted only 18 job applications over a three-month period before paused their job search to pursue new certifications. The employer also took issue with the fact that the employee failed to produce their Notice of Assessment (“NOA”) during the mitigation period.

The Superior Court noted that the burden of showing that an employee’s mitigation efforts were unreasonable rests with the employer, which must demonstrate that the employee failed to take reasonable steps to mitigate damages and that, had reasonable steps been taken, the employee would have been expected to secure comparable employment. The Superior Court found that the employer’s evidence was insufficient to demonstrate that the employees’ mitigation efforts were unreasonable and that they would have found work more quickly had they not pursued new certifications. However, the Superior Court agreed with the employer that the employee’s refusal to produce their NOA was unacceptable, given that their income during the notice period was in dispute.

The Superior Court drew an adverse inference against the employee and, as a result, reduced the notice period by three months.

3. Workplace investigations

In Metrolinx v. Amalgamated Transit Union, Local 1587, 2025 ONCA 415, the Court of Appeal addressed employers’ statutory duties to investigate allegations of workplace harassment and their right to discipline employees for off-duty conduct. In this case, five employees sent messages in a WhatsApp group chat on their personal phones about a number of female employees. Despite the absence of a formal complaint, the employer investigated the texts and subsequently terminated the employment of each of the five employees for cause. A grievance was filed.

The arbitrator found that the grievors had been terminated without just cause. On judicial review, the Divisional Court found that the arbitrator’s reasons were incorrect in law. The union appealed the Divisional Court’s decision to the Court of Appeal.

The Court of Appeal dismissed the appeal. It concluded that the arbitrator erred in finding that the employer had no authority to discipline the employees for their off-duty conduct. It also concluded that the arbitrator erred in finding that the impact of the employees’ communications was not manifest in the workplace, as sending and distributing the messages to other employees made the conduct a workplace issue.

The Court of Appeal further determined that the arbitrator erred in finding that an investigation could not be conducted in the absence of a complaint. The Occupational Health and Safety Act requires employers to investigate allegations of harassment. The arbitrator relied on harmful myths, stereotypes, and presumptions about sexual harassment and failed to recognize that there are various reasons for a victim of harassment’s decision not to pursue an official complaint, none of which negate the harassing behaviour or the employer’s obligation to investigate. The Court of Appeal remitted the matter back to be determined by a different arbitrator.

At the second arbitration the arbitrator described the five employees’ conduct as “egregious,” but noted that the employees apologized for their conduct and expressed regret. She ordered reinstatement of the employees with full service and seniority, minus some time for suspension, as the discipline for their conduct.

4. Inducement

In a reminder that inducing an employee to leave stable employment may be costly, the employee in Miller v. Alaya Care Inc., 2025 ONSC 1028 was approached by a competitor of their then-employer and was persuaded to leave after 12 years of service. At the time, the employee was the most senior employee at their former employer. Seven months after starting employment with the competitor, the employee was terminated without cause. The employee brought a claim for wrongful dismissal, alleging that they had been induced and that the reasonable notice period should be increased as a result.

On a summary judgment motion, the Superior Court held that the employee was wrongfully dismissed and entitled to a reasonable notice period of 14 months. The Superior Court determined that the competitor had reached out to the employee, represented that the employee’s experience would assist in “growing” the competitor company, made inquiries about the employee’s compensation with their former employer so that the employee could be “lured” to leave their employment, and was prepared to indemnify the employee in the event that their previous employer commenced litigation against them for joining the competitor.

The Superior Court concluded that this conduct went beyond normal expressions of interest. Coupled with the employee’s senior position as Vice President, the Superior Court determined that a 14-month reasonable notice period was appropriate in the circumstances.

5. Clawback clauses

On December 23, 2025, the Superior Court released a decision addressing what is typically referred to as a clawback clause in a settlement agreement entered into following the termination of employment. The decision provides useful guidance for employers as they look to enter into settlement agreements with terminated employees in 2026.

In Cross v. Cooling Tower Maintenance Inc., 2025 ONSC 7203, the plaintiff’s employment was terminated without cause after 26.5 years of service. The parties signed a settlement agreement that provided for a 24-month salary continuance, along with a clause requiring the employee to immediately advise the employer upon obtaining new employment. In such circumstances, the employee would be entitled to a lump sum payment equivalent to 50% of the remaining amount owing under the settlement (the clawback clause).

Within approximately four months of signing the settlement agreement, the employee started a new job but failed to advise the employer as the settlement required. Instead, the employer continued to receive salary continuance payments. Months later, the employer discovered that the employee had been working elsewhere while continuing to receive those payments and ceased making further payments. The employer considered the employee’s actions to be a repudiation of the settlement agreement and did not pay the 50% lump sum as the clawback clause required. The employee filed a claim seeking payment of the lump sum, less the salary continuance paid after beginning new employment. The employer counterclaimed for the amounts paid in excess of the employee’s ESA entitlements or, alternatively, for unjust enrichment, as well as punitive and aggravated damages.

The Superior Court found that the employee intentionally failed to advise the employer of their new employment. While this was a material breach of the settlement agreement, it did not amount to repudiation, as the employer was not deprived of substantially the whole benefit of the agreement. In particular, the employer remained protected from litigation under the terms of the agreement.

In addition, the settlement agreement did not clearly indicate that a lack of disclosure amounted to repudiation of the agreement. To establish repudiation, there must be an intention by at least one party to no longer be bound by the contract.

The Superior Court concluded that the employer breached the settlement agreement by failing to make the 50% lump sum payment, less the salary continuance paid to the employee after they began new employment. The Superior Court also determined that the employee’s behaviour was not sufficiently malicious, oppressive, or high-handed to justify an award of punitive damages.

Conclusion

Appeals in Baker and Li were heard by the Ontario Court of Appeal on March 26, 2026. It may be that, by next year’s rundown of top employment law cases, the uncertainty surrounding the enforceability of termination clauses containing the controversial phrase “at any time” will finally be settled.

Please contact any member of our group if you would like to discuss the effect of these decisions on your workplace.

Inna Koldorf is a partner in Miller Thomson LLP’s Labour and Employment Group, where she advises employers on labour, employment and human rights issues. Inna would like to thank Keona Lau, articling student, for her assistance in preparing this article.