New Court Ruling to Affect Employment Contracts and Termination Provisions Across Ontario

Since early 2024, Ontario employers have navigated a landscape of uncertainty regarding their employment agreements. The controversial Dufault v. The Corporation of the Township of Ignace (2024 ONSC 1029) decision threw standard termination clauses into question—specifically, those containing the phrase "at any time."

For many Ontario business owners, this created a significant risk: the potential of having their employment contracts deemed unenforceable, leaving them on the hook for costly common law notice periods instead of the minimums established by the Employment Standards Act (ESA). 

The Ontario Court of Appeal has delivered excellent news for employers. The recent decision in Baker v. Van Dolder’s Home Team Inc. (2026 ONCA 568) provides a clear path forward on the enforceability of standard termination clauses. 

Here is a breakdown of the Court’s ruling, the shift in judicial reasoning, and what it means for your business. 

The New Rules of Enforceability  

The Court of Appeal's ruling clarifies two major components of employment contracts that have been heavily scrutinized in recent years: 

"At Any Time" Wording is Valid

The Court firmly rejected the argument that the phrase "at any time" secretly implies an employer’s intention to terminate an employee unlawfully (such as during a statutory job-protected leave or as a reprisal). The phrase simply recognizes the mutual, foundational right of both parties to terminate an agreement without cause, provided it complies with statutory protections. 

Savings Clauses May Be Effective

A savings clause provides that, regardless of the contract's termination provisions, the employee will receive at least their minimum termination entitlements as required by the ESA.  

Historically, Ontario courts have often found termination-with-cause provisions unenforceable where they sought to deny ESA minimum entitlements in circumstances that fell short of the ESA's narrow "wilful misconduct" standard (for example, poor performance).  

In this decision, however, the Court held that a with-cause-termination provision can remain enforceable if it includes clear savings language—such as "except for any minimum compensation or entitlements prescribed by the ESA"—because the clause makes clear that employees dismissed with cause may still receive any ESA minimum entitlements unless the ESA itself permits those entitlements to be withheld. 

A Return to Common-Sense Interpretation 

A key takeaway from this ruling is the shift in how courts will review employment contracts. The Court of Appeal reinforced that judges should not act like legislators or hunt for hidden ambiguities using a highly technical "magic words" approach. 

Instead, courts must determine the objective intention of both parties by reading the contract as a whole and applying a practical, common-sense lens. This aligns with recent decisions in other jurisdictions, such as the BC Court of Appeal’s ruling in Egan v. Harbour Air Seaplanes LLP (2024 BCCA 222), signaling a broader, employer-friendly trend toward practical contractual interpretation. 

Do you need help understanding how this ruling affects your business? 

If you are managing your own employment contracts, this ruling is a critical reminder of how fast employment law evolves—and how much hinges on the exact phrasing of your documents. Relying on outdated templates or generic Internet contracts can expose your business to massive liability during a termination. 

By partnering with Peninsula Canada, you gain access to ironclad, expertly drafted employment agreements that adapt to the latest judicial rulings. We absorb the legal heavy lifting so you can focus on running your business with peace of mind. 

If you are a business owner looking to secure your legal standing, do not leave your contracts to chance. Reach out to our HR experts today at (1) 833-247-3652 to ensure your business is fully protected.