From “Most Of The Time” Back To “Anytime” - Ontario Court Of Appeal Clarifies Framework For Interpreting Termination Clauses

In March 2025, we wrote about the Ontario Superior Court's decision in Baker v. Van Dolder's Home Team Inc.,¹ a case that appeared to signal a significant shift in Ontario employment law. At the time, the Court held that a termination clause permitting an employer to terminate employment “at any time” was inconsistent with the Employment Standards Act (“ESA”)², rendering the employer's entire termination regime unenforceable, and entitling its employees to common law reasonable notice, regardless of the reason for their termination.

Just over a year later, the Ontario Court of Appeal has decisively reversed course. In Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568,³ the Court of Appeal overturned the lower court's decision and reaffirmed a more practical and contextual approach to interpreting employment agreements. In doing so, the Court not only restored the enforceability of the termination provisions at issue, but also provided important guidance on how termination clauses should be interpreted going forward.  

While Baker restores a measure of certainty in Ontario, the decision remains subject to further appeal. Furthermore, other provinces have yet to directly address the interpretive issues considered by the Ontario Court of Appeal. Employers in BC should therefore continue to monitor developments in this evolving area of law.

A Paradigm Shift That Wasn't

As we discussed in our earlier article, the motion judge in Baker concluded that language permitting an employer to terminate an employee “at any time” violated the ESA because Ontario employment legislation prohibits employers from terminating employees in certain circumstances, such as when an employee is returning from a protected leave or exercising statutory rights. The Court reasoned that because an employer cannot literally terminate an employee at any time, the clause violated the ESA and was therefore void.

The practical implications were significant; one defective termination provision could render an entire termination scheme unenforceable. As a result, language found in countless employment agreements suddenly appeared vulnerable to challenge.

The Court of Appeal has rejected this reasoning, holding that the motion judge's interpretation resulted from reading individual words in isolation rather than considering the contract as a whole and the parties' objective intentions. Going back to basics, the Court of Appeal found that, while employment contracts require careful scrutiny because of the power imbalance inherent in the employment relationship, courts must still apply ordinary principles of contractual interpretation.

A Return to Context

In reversing the lower court's decision, the Court of Appeal clarified the framework for interpreting termination clauses. The Court emphasized that employment agreements must be interpreted as a whole, with a view to determining the parties' objective intentions in light of the surrounding circumstances. The Court of Appeal found that courts should not invalidate termination clauses based on hypothetical interpretations that neither party reasonably intended, such as interpretations suggesting that an employer would terminate employment in circumstances prohibited by the ESA.

In rejecting what it described as a "magic words" approach, the Court cautioned against focusing on isolated phrases without regard to the broader contractual context. Applying that framework, the Court concluded that the phrases "at any time" and "for any reason" were not inconsistent with the ESA and did not authorize unlawful conduct but rather reflected the principle that employers may terminate employment without cause, provided they comply with their contractual and statutory obligations.

An Overlooked Aspect of the Decision: The For-Cause Clause

While much of the commentary surrounding Baker has focused on the “at any time” language, the Court's treatment of the for-cause provision may be equally important.

In Baker, the employee argued that the for-cause clause improperly defined “just cause” more broadly than the ESA's narrower “wilful misconduct” standard, an issue that has been central to a number of recent cases, including Dufault v. The Corporation of the Township of Ignace.⁴ The Court of Appeal distinguished Baker from those cases because, although the contractual definition of cause extended beyond ESA wilful misconduct, the agreement expressly preserved the employee's entitlement to all minimum compensation and benefits required by the ESA. As a result, the clause remained compliant and enforceable. In reaching this conclusion, the Court of Appeal reaffirmed that employers may validly incorporate ESA entitlements by reference rather than reproducing detailed statutory language within the contract itself.

The Court of Appeal's analysis emphasizes reading employment agreements as a whole. Consistent with this approach, is another recent decision of the Ontario Superior Court, Boyle v. Salesforce.com Canada Corporation, wherein the court considered an employment agreement together with the employer's handbook and related employment documents.⁵ The court found that the combined effect of those documents, including references to “at-will” employment and differing legal standards across jurisdictions, created genuine uncertainty regarding the a for-cause clause, rendering it unenforceable.

Taken together, Baker and Boyle reinforce that termination provisions must be assessed in their full contractual context. Moreover, Baker suggests that courts should not readily find ambiguity based on strained or hypothetical interpretations. Rather, a termination provision should only be found ambiguous where a genuine uncertainty remains after the agreement is interpreted as a whole.

Waksdale Remains Untouched

Notwithstanding its employer-friendly outcome, Baker should not be viewed as a wholesale retreat from the Courts’ previous decisions governing termination clauses.

The employer in Baker invited the Court to reconsider Waksdale v. Swegon North America Inc.,⁶ arguing that an unenforceable for-cause provision should not necessarily invalidate an otherwise compliant without-cause clause. The Court declined to revisit this rule because it concluded that the termination provisions at issue complied with the ESA. As a result, Waksdale remains binding law in Ontario, and employers continue to face significant risk where any aspect of a contractual termination regime falls below statutory minimum standards, as this will invalidate the entire termination provision.

Key Takeaways from Baker

The Court of Appeal's decision substantially reduces the uncertainty created by Baker, and provides welcome clarification regarding the interpretation of termination clauses.

Employers should note several important takeaways:

• Language permitting termination “at any time” or “for any reason” is not inherently inconsistent with the ESA.
• Termination clauses must be interpreted contextually and as part of the agreement as a whole.
• Courts should not invalidate clauses based on hypothetical interpretations that neither party reasonably intended.
• Properly drafted for-cause provisions may continue to distinguish between common law cause and ESA wilful misconduct, provided statutory minimum entitlements are preserved.  
• Despite Baker, Waksdale remains good law, and a deficiency in one termination provision may still jeopardize an entire termination regime.

Looking Ahead

When we wrote about the lower court's decision in 2025, we observed that Ontario appeared to be moving toward a world in which employers could terminate employees only “most of the time,” and not “at any time.” The Ontario Court of Appeal has now provided a clear response.

The significance of Baker extends beyond the survival of familiar termination language. The decision signals a return to contextual interpretation, directing courts to assess employment agreements as a whole rather than focusing on isolated words or hypothetical ESA violations.

At the same time, cases such as Boyle demonstrate that courts remain willing to scrutinize employment agreements and related employment documents where they create genuine uncertainty regarding employee rights and entitlements.

What Does Baker mean for BC Employers?

Although Baker is not binding on British Columbia courts, its reasoning may prove influential. Like Ontario courts, BC courts generally interpret employment agreements using ordinary principles of contractual interpretation while ensuring compliance with minimum employment standards.

Recent BC authority reflects a similar approach. In Hoem v. Macquarie Energy Canada Ltd.,⁷ the British Columbia Supreme Court considered a wrongful dismissal claim in which the enforceability of a termination regime was challenged based on the interaction of multiple employment documents. The court emphasized that employment agreements must be read as a whole and concluded that the employer's use of various contractual documents created uncertainty regarding the employee's termination rights.

Viewed together, Baker and Hoem suggest that courts will continue to put termination provisions under the microscope, but will do so by examining the contractual framework as a whole rather than focusing on isolated wording.

For BC employers, Baker provides a helpful reminder that employment agreements should clearly preserve statutory minimum entitlements and avoid creating uncertainty regarding employee rights. As the law continues to evolve across jurisdictions, regular review of employment agreements remains prudent. 

Footnotes

^{1 Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952.}

^{2 Employment Standards Act, SO 2000. , c 41 [Ontario ESA].}

^{3  Baker v. Van Dolder’s Home Team Inc., 2026 ONCA 568.}

^{4  Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029.}

^{5 Boyle v. Salesforce.com, 2025 ONSC 2580.}

^{6 Waksdale v. Swegon North America Inc., 2020 ONCA 391.}

^{7 Hoem v Macquarie Energy Canada Ltd., 2025 BCSC 1508.}

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