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Ontario's approach to interpreting termination clauses has departed materially from the careful balance of competing interests articulated over 30 years ago in Machtinger v HOJ Industries Ltd. In that case, the Supreme Court of Canada held that "an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the Act" and that "[s]uch contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice."
This departure is illustrated by the growing body of recent cases reaching different outcomes on similar wording, including whether the words "at any time" invalidate a termination clause.
On March 25, 2026, McCarthy Tetrault represented Van Dolder's Home Team Inc. in this appeal, and we are hoping that it provides much needed guidance on the enforceability of termination clauses.
The case arises from a wrongful dismissal action brought by a former short-service employee, Mr. Baker. Van Dolder's sought summary judgment on the basis that Mr. Baker's employment agreement contractually limited his entitlement to common law reasonable notice upon termination without cause. The motion judge dismissed the motion, finding that both the "without cause" and "with cause" the termination provisions were unenforceable and that Mr. Baker was entitled to common law reasonable notice. Specifically, the motion judge found that language permitting Van Dolder's to terminate Mr. Baker's employment "at any time" contravened statutory protections under the Employment Standards Act, 2000 (the "ESA"), rendering the entire clause unenforceable. The motion judge also found that the "with cause" provision was unenforceable by relying on the fact that the clause allows termination for "just cause", which is a lower standard than the "wilful misconduct" that the ESA requires an employee to meet before losing their entitlements under the ESA.
We argued on behalf of the employer, that there is no inconsistency between the words "at any time" and the ESA. Accordingly, that language cannot be read as authorizing the types of termination identified by the motion judge—particularly when the employment contract is read as a whole, in light of its ESA-compliance provisions, and alongside Van Dolder's duty of good faith in the manner of dismissal. We also argued that the "with cause" provision does not depart from the minimum standards guaranteed by the ESA. It only removes the employee's entitlement to common law reasonable notice; which the parties are permitted to contract out of. Finally, we argued that the Ontario Court of Appeal's decision in Waksdale v. Swegon North America Inc. was rendered per incuriam and should no longer be followed.
Recognizing the broader implications for Ontario businesses, the Ontario Chamber of Commerce was granted leave to intervene as a friend of the Court. Parkdale Community Legal Services and Income Security Advocacy Centre were also granted leave to intervene.
A companion appeal about termination clauses enforceability - Li v. Wayfair Canada ULC., - was joined with this appeal and was also heard by the Court on March 25th.
The outcome has the potential to provide clarity and certainty for employers regarding the drafting and enforceability of termination clauses.
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