Subscribe to our newsletters
Ontario Court Confirms Termination Clause Enforceable
Termination clauses continue to be one of the most litigated parts of employment agreements in Ontario. A single poorly worded phrase can expose employers to months of common law notice, bonus entitlements, or equity compensation that far exceed statutory minimums. Recent cases like Dufault and Baker had cast doubt on the enforceability of common wording, especially phrases like “at any time” or “for any reason.”
The Superior Court’s decision in Li v. Wayfair Canada Inc. offers important clarification.
While not eliminating risk, the ruling shows that courts may uphold termination provisions containing these phrases when the agreement as a whole clearly preserves Employment Standards Act, 2000 (ESA) minimums. Employers should take note of the drafting lessons this case provides.
Case Summary
- Senior Product Manager, age 45, hired January 2023.
- Terminated without cause on October 17, 2023 (just under nine months).
- Paid one week’s base salary and benefits (ESA minimum for service).
- Sought five months of common law notice and RSUs scheduled to vest in February 2024.
The Court upheld the termination clause limiting entitlements to ESA minimums and dismissed the claim for additional damages.
The Contract Wording the Court Considered
- With cause: employer may terminate “at any time for Cause … unless expressly required by the ESA”.
- Without cause: “After your probationary period concludes, in the absence of Cause, the Company may terminate your employment at any time and for any reason by providing you with only the minimum statutory notice/termination/severance/benefits as required by/under the ESA.”
- “Cause” definition: explicitly tied to the ESA’s willful misconduct standard.
Result: The Court held the termination provisions enforceable and dismissed the wrongful dismissal claim beyond ESA minimums.
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“Termination clauses can protect your business, but if they’re not carefully drafted, they may expose you to costly claims.
Consulting a lawyer ensures your contracts are both enforceable and tailored to your needs.”
How the Court Distinguished Dufault and Baker
- In Dufault and Baker, the wording and structure created an unlawful right to terminate contrary to the ESA (e.g., suggesting termination even where the ESA prohibits it).
- In Li, the Court found the agreement repeatedly and clearly tethered entitlements to the ESA and defined “Cause” by reference to the ESA, so the presence of “at any time” (and “for any reason”) did not automatically invalidate the clause.
Practical point: Courts will not pick apart clauses word‑by‑word where the agreement, read as a whole, unambiguously preserves ESA minimums.
Common Law Scenario (If Clause Had Failed)
The Court assessed notice in the alternative and would have awarded four months of reasonable notice to a short‑service but well‑paid employee. It also indicated that RSUs slated to vest during that hypothetical notice period would have been owed absent clear plan language to the contrary.
Drafting Lessons for Ontario Employers
- Read‑as‑a‑whole compliance: Ensure termination provisions repeatedly anchor entitlements to the ESA across all related sections.
- Define “Cause” by ESA standard: Use the ESA’s wilful misconduct wording to avoid an over‑broad “cause” definition.
- Phrases like “at any time/for any reason”: These words do not automatically invalidate a clause, but they increase risk if ESA compliance is not crystal‑clear elsewhere in the agreement.
- Clarity in exclusion clauses: If limiting incentives (bonuses/RSUs) during or after notice, use clear, precise, and scenario‑specific language; vague exclusions are vulnerable.
- Holistic drafting: Inconsistency across sections can taint the entire termination regime.
What This Means Now
- Post‑Dufault/Baker, Li indicates courts may uphold “at any time” language where the agreement as a whole preserves ESA minima and does not contract out of them.
- However, risk remains if wording suggests termination in situations barred by the ESA, or if other parts of the employment contract depart from the statute.
How Achkar Law Can Help
We help Ontario employers review and update employment agreements to ensure ESA‑compliant termination provisions, clear incentive‑plan treatment, and consistent drafting throughout.
We also assist with agreement audits and defending claims where clauses are challenged.
Strong agreements protect your business.
Li v. Wayfair confirms that well-drafted employment agreements can withstand legal challenges, while cases like Baker and Dufault show how vague or outdated contracts can fail and create risk.
Achkar Law helps employers draft enforceable employment and executive compensation agreements and defends businesses when disputes or lawsuits arise.
Contact us to strengthen your agreements and reduce legal risk.
Call toll-free: 1-800-771-7882 | Email: [email protected]
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©
Workplace Law Topics: Employment Agreements, Employee Terminations and Layoffs, Employment Litigation, Executive Compensation Planning, Employment Law