A Tale Of Two Conclusions: Ontario Court Of Appeal Hands Down Significant Decisions On The Interpretation Of Employment Agreements

It was the best of times, it was the worst of times—and which side you are on may depend on which case you are reading. On August 6 and 7, the Ontario Court of Appeal released its highly anticipated decisions in Baker v. Van Dolder’s Home Team Inc.¹, Li v. Wayfair Canada², and Daniel Wigdor v. Facebook Canada Ltd. and Meta Platforms, Inc.³. These cases have wide-ranging implications for the enforceability of employment (and related) contracts and employee entitlements upon termination without cause.

What you need to know

• “At any time” and “for any reason” language does not automatically invalidate employment termination provisions.
• Courts will focus on the parties’ objective intentions and reasonable interpretations, not hypothetical ones.
• Hypothetical ambiguity or potential unfairness will not render an employment termination clause unenforceable.
• When assessing an employee’s Employment Standards Act minimum entitlements on a termination without cause, employers should consider all terms and conditions of employment, including equity compensation and long-term incentive awards, such as restricted share units.
• Care must always be taken when drafting employment termination clauses, including in employment agreements, equity-based compensation plans, and related award agreements, to ensure compliance with statutory minimum requirements.

The decisions at a glance

In Baker and Li, the Court of Appeal clarified that employment agreement termination provisions containing “at any time” and “for any reason” language are neither inherently ambiguous nor unenforceable, provided they clearly guarantee employees’ minimum entitlements under the Employment Standards Act, 2000 (the ESA). Further, the Court held that “at any time” and “for any reason” language does not create genuine ambiguity conflicting with the ESA when the contract, read as a whole, demonstrates the employer’s objective intent to comply with statutory minimums. The Court rejected the plaintiffs’ arguments based on hypothetical interpretations or perceptions of unfairness, reaffirming that general principles of contractual interpretation—including the parties’ objective intentions—apply to employment agreements.

In Wigdor, the Court of Appeal considered how sections 60 and 61 of the ESA should be interpreted and applied in the context of restricted share units (RSUs) and related agreement provisions forfeiting RSUs upon a termination of employment. The Court overturned the application judge’s decision that an employee’s award of RSUs should be forfeited immediately on termination, and found instead that award agreement clauses contravene the ESA and were therefore to be void, entitling the employee to common law damages relating to the value of RSUs vesting throughout the common law notice period.

Lower court decisions in Baker and Li

Both Baker and Li involved employees who were dismissed without cause and sought common law damages, claiming that their employment agreement termination provisions were unenforceable. Their agreements permitted termination of employment “at any time” (Baker) or “at any time and for any reason” (Li). Despite these similarities, the motion judges reached opposite conclusions.

In Baker, on a motion for summary judgment, the motion judge found the termination provision unenforceable, reasoning that “at any time” conflicted with ESA prohibitions on termination in certain circumstances (e.g., following a leave or as a reprisal). The motion judge also struck down the termination with cause provision—even though it preserved ESA minimums—on the basis that an unsophisticated employee might misinterpret it as denying statutory minimum entitlements in all cases if terminated with cause.

In Li, also on a motion for summary judgment, a different motion judge upheld the inclusion of “at any time and for any reason", finding that the contract as a whole sought only to exclude common law damages while preserving ESA minimums.

Key developments from the Court of Appeal’s decision in Baker and Li

The Court of Appeal allowed the Baker appeal and dismissed the Li appeal, resolving the jurisprudential split.

The Court reaffirmed that general principles of contractual interpretation apply to employment agreements, noting that it typically favours interpretations that encourage employers to comply with the ESA. Critically, the Court clarified that:

… a contractual provision is not ambiguous merely because it is possible to identify multiple potential or hypothetical interpretations. Genuine ambiguity only arises where there are two or more reasonable but differing interpretations considered in the context of the entire contract… Moreover, courts should not strive to find an ambiguity where none reasonably exists⁴.

With these principles in hand, the Court upheld the challenged termination provisions in both cases.

Termination provisions containing “at any time” and “for any reason” are enforceable

The Court held that reading these provisions literally and in isolation—without considering the parties’ objective intentions or the contract as a whole—was untenable.

In Baker, accepting the employee’s argument would require concluding that Mr. Baker intended to contract out of his statutory entitlements and that his employer—whose contract repeatedly referenced ESA compliance—intended to violate the ESA. The Court found this implausible.

The Court concluded that “at any time” merely reflects, per Wallace⁵, that termination of employment is valid whenever it occurs, provided the employee receives their contractual and statutory minimum entitlements. Those words do not reasonably manifest an employer’s intention to terminate employment contrary to the ESA or other legislation.

The Court’s analysis in Li was similar. Relying again on Wallace, the Court confirmed that employers may terminate employment “for any reason”, provided contractual and statutory entitlements are met. “For any reason” does not reasonably indicate an employer’s intention to terminate for reasons contrary to the ESA.

Termination with cause provisions are enforceable despite potential misinterpretations

The Court also held that termination with cause provisions are not rendered unenforceable merely because an employee might misinterpret them.

Under common law, employers can terminate for just cause without notice in broader circumstances than under the ESA, which preserves statutory minimum entitlements unless the employee’s conduct amounts to “wilful misconduct”. Termination provisions become unenforceable only when drafted so broadly that they would deny ESA entitlements, even where the conduct does not meet the wilful misconduct standard⁶.

The Court found no such inconsistency in Baker. The provision explicitly preserved ESA minimums even upon termination with cause, bringing it into alignment with the ESA. Referentially incorporating ESA entitlements supports enforceability. Moreover, failing to fully explain the “complicated” interplay between common law just cause and ESA wilful misconduct will not invalidate an otherwise enforceable provision.

Key developments from the Court of Appeal’s decision in Wigdor

As discussed in our prior bulletin on the application judge’s decision in Wigdor, the application judge held that Dr. Wigdor’s unvested RSUs were forfeited following his dismissal under the applicable RSU agreements (the RSU Agreements). The application judge also found that section 61 of the ESA is not applicable to RSU entitlements because they are not “wages” as referred to in that section. The Court of Appeal allowed Dr. Wigdor’s appeal, finding that the application judge misinterpreted sections 60 and 61 of the ESA—which govern employer obligations on termination, including termination pay—and misapplied them to Dr. Wigdor’s RSU entitlements.

Section 60(1)(a) of the ESA prohibits employers from altering any “term or condition of employment” during the statutory notice period, and section 61 requires payment of a “lump sum equal to the amount” the employee would have received had working notice been given under section 60. Because the RSU Agreements required immediate forfeiture upon termination of employment—rather than continued vesting through at least the statutory notice period or payment of an amount equal to the compensation the employee would have received from such vesting—the Court found them to be contrary to section 60(1)(a) and deemed the forfeiture terms unenforceable, entitling Dr. Wigdor to damages for the value of the RSUs that would have continued vesting during his common law notice period.

Notably, the Court found the RSU Agreements were incorporated by reference into Dr. Wigdor’s employment agreement—supported in part by language specifically referencing RSUs in that agreement—and thus constituted terms and conditions of employment under sections 60 and 61 of the ESA. The Court also declined to decide whether RSU entitlements constitute “wages” in the ESA, saying that the issue would be better left to an appeal where its resolution is determinative.

Practical considerations for employers

The decision in Baker and Li provides welcome clarity: “at any time” and “for any reason” language does not invalidate a termination clause, provided the clause, read in the context of the agreement as a whole, clearly complies with the ESA. The same reasoning applies to termination with cause provisions.

The Court’s decision in Wigdor demonstrates that care in drafting employment agreements, along with RSU and other equity-based compensation plans and related award agreements, remains essential. As such, these decisions serve as a timely reminder that employers should review existing employment termination clauses in their equity incentive plans, award agreements, employment agreements, and related documents to ensure they are unambiguous and ESA-compliant (or compliant with other applicable employment standards legislation).

Footnotes

1. Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 [Baker].

2. Li v. Wayfair Canada ULC., 2025 ONSC 2959 [Li].

3. Daniel Wigdor v. Facebook Canada Ltd. and Meta Platforms, Inc., 2025 ONSC 4861 [Wigdor].

4. Baker, para 32.

5. Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701 (“Wallace”), para. 75.

6. As was the case in Dufault v. Ignace (Township), 2024 ONCA 915.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.