For Ontario employers, the termination clause is often the most valuable sentence in an employment contract. A clause that holds up can limit what you owe a departing employee to the minimums under the Employment Standards Act (ESA). A clause that fails can expose you to common law reasonable notice, which can mean many months of pay. Over the last few years, the courts have made these clauses harder to get right. In 2026, though, the Court of Appeal gave employers some welcome clarity.
The “at any time” debate is settled
In 2024, a Superior Court decision called Dufault found that termination language allowing an employer to end employment “at any time” breached the ESA, because the Act doesn’t allow terminations at certain times, such as during protected leaves or as reprisal. That decision sent employers scrambling, and lower courts split on whether similar wording was fatal.
On August 6, 2026, the Ontario Court of Appeal addressed the issue in Baker v. Van Dolder’s Home Team Inc., heard together with Li v. Wayfair Canada ULC. The Court held that clauses using “at any time” or “at any time and for any reason” were valid and enforceable. The key point is that courts must read the contract as a whole. Where the agreement repeatedly commits to complying with the ESA, a court shouldn’t strain to find an interpretation that would permit an illegal termination.
Why Waksdale still matters
The Court of Appeal didn’t revisit its 2020 decision in Waksdale v. Swegon, and that decision still has real teeth. Under Waksdale, if any termination provision in the contract breaches the ESA, all of the termination provisions can fail, even ones that would be fine on their own.
The most common trap is the “for cause” clause. Many contracts say an employee terminated for cause gets nothing. But the ESA’s standard for denying minimum entitlements, wilful misconduct, is stricter than common law just cause. If your cause clause doesn’t account for that difference, it can sink your without-cause clause as well. The Court in Baker did confirm, however, that a cause clause referring to ESA entitlements can be acceptable.
Other common problems
Termination clauses also fail when they don’t guarantee benefits continuation during the statutory notice period, when they exclude elements of pay the ESA requires, when they forget about ESA severance pay for qualifying employees, or when they’re signed after the employee has already started work without fresh consideration. Small drafting mistakes can have big consequences.
What employers should do now
The Baker decision is good news, but it’s not a reason to stop reviewing your contracts. If your templates are more than a couple of years old, have them checked against current law. Look at every termination-related clause together, including probation, cause and without-cause provisions. Make sure the contract clearly commits to providing at least ESA minimums. And make sure new employees sign before their first day.
If you’re relying on a cause termination, remember that just cause remains a very high bar. Our article on the limits of just cause terminations explains why.
Get your contracts reviewed
A contract review is one of the most cost-effective legal steps an employer can take. Our employment law team drafts and updates employment contracts for businesses across Ontario, and our Toronto employment lawyers can advise on specific terminations. Read more about how an employment lawyer can protect your business.
This article is general information, not legal advice.
