{"id":37304,"date":"2025-08-27T11:56:07","date_gmt":"2025-08-27T15:56:07","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=37304"},"modified":"2025-09-19T15:18:50","modified_gmt":"2025-09-19T19:18:50","slug":"good-news-for-employers-ontario-courts-provide-clarity-on-enforceability-of-termination-provisions","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/labour-and-employment\/good-news-for-employers-ontario-courts-provide-clarity-on-enforceability-of-termination-provisions\/","title":{"rendered":"Good news for employers: Ontario Courts provide clarity on enforceability of termination provisions"},"content":{"rendered":"\n

Introduction<\/h2>\n\n\n\n

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.<\/p>\n\n\n\n

Context: Dufault<\/em> and the uncertainty around termination clauses<\/h2>\n\n\n\n

Many employers will recall the 2024 decision in Dufault v. The Corporation of the Township of Ignace<\/em><\/a>, where the Ontario Superior Court held that a termination provision giving the employer the right to terminate employment \u201cat any time\u201d and in its \u201csole discretion\u201d was contrary to Ontario\u2019s Employment Standards Act, 2000<\/em><\/a> (\u201cESA\u201d), and therefore unenforceable. This led to significant concern among employers, particularly after Baker v. Van Dolder\u2019s Home Team Inc<\/em><\/a>.<\/em> appeared to apply Dufault<\/em> even in the absence of \u201csole discretion\u201d language.  The Court\u2019s decision in Baker <\/em>is currently under appeal.<\/p>\n\n\n\n

Against that backdrop, three recent decisions provide helpful guidance.<\/p>\n\n\n\n

Three employer-friendly clarifications<\/h2>\n\n\n\n

Jones v. Strides Toronto Support Services<\/em>, 2025 ONSC 2482 (\u201cJones\u201d)<\/em><\/h3>\n\n\n\n

In Jones<\/em> \u2013 much like in Baker<\/em> \u2013 the Court addressed whether a \u201cwithout cause\u201d termination provision was unenforceable because it permitted termination \u201cat any time.\u201d<\/p>\n\n\n\n

In contrast to Baker, <\/em>Justice Moore explicitly distinguished Dufault<\/em> and held that \u201cthe Dufault<\/em> decision does not stand for the proposition that the words \u2018at any time\u2019 divorced from \u2018sole discretion\u2019 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<\/em> and make it unenforceable.\u201d<\/p>\n\n\n\n

While the termination provision was ultimately invalidated on other grounds, this decision provides assurance that the mere presence of the phrase \u201cat any time\u201d in a termination provision will not automatically render the clause unenforceable.<\/p>\n\n\n\n

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

Li v. Wayfair Canada ULC<\/em>., 2025 ONSC 2959<\/a> (\u201cLi<\/em>\u201d)<\/h3>\n\n\n\n

In Li<\/em>, the impugned \u201cwithout cause\u201d termination provision not only purported to permit termination \u201cat any time,\u201d but also \u201cfor any reason.\u201d Nevertheless, Justice Dow distinguished Dufault<\/em>, noting that the without cause termination provision before the Court clearly and repeatedly indicated that payments would be made as \u201crequired by\u201d or \u201cunder\u201d the ESA, in contrast to Dufault<\/em>, where the without cause provision had \u201cfailed to provide for all types of wages such as vacation pay or sick days.\u201d<\/p>\n\n\n\n

The Court also held \u2013 without elaborating \u2013 that the wording of the termination provision in Baker <\/em>was distinguishable and so a different conclusion was warranted.<\/p>\n\n\n\n

Wigdor v. Facebook Canada Ltd<\/em>.<\/em>, 2025 ONSC 4861<\/a> (CanLII) (\u201cWigdor<\/em>\u201d)<\/h3>\n\n\n\n

In Wigdor, <\/em>the applicant employee raised Dufault <\/em>and Baker <\/em>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\u2019s termination was \u201clater found to be invalid or unlawful.\u201d<\/p>\n\n\n\n

The employee argued that since there are circumstances in which the ESA prohibits termination, by purporting to remove part of an employee\u2019s 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.<\/p>\n\n\n\n

Justice Leiper rejected this argument, holding that Dufault<\/em> and Baker <\/em>deal with employment agreements, not separate compensation agreements, and the applicant\u2019s contractual entitlements were independent of any relief he may have been entitled to receive under his employment agreement, the ESA, or the common law.<\/p>\n\n\n\n

While it is beyond the scope of this article, Wigdor <\/em>will also be of interest to employers for the Court\u2019s determination that RSUs are not \u201cwages\u201d or \u201cbenefits\u201d 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\u2019s 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.<\/p>\n\n\n\n

Key takeaways for employers<\/h2>\n\n\n\n