For the past few years, Ontario employers have had good reason to be nervous about the wording in their employment agreements.
Words that had appeared in termination clauses for years — including “at any time,” “at the discretion of the employer,” and “for any reason” — suddenly became potential problems. A single phrase could potentially result in an entire termination clause being thrown out, leaving an employer exposed to common law reasonable notice, which can be significantly more expensive than the employee’s minimum entitlements under the Employment Standards Act, 2000 (the “ESA”).
A new combined decision from the Ontario Court of Appeal provides some much-needed clarity.
In Baker v. Van Dolder’s Home Team Inc. and Li v. Wayfair Canada ULC, 2026 ONCA 568, the Court confirmed that words such as “at any time” and “for any reason” do not automatically make a termination clause unenforceable. Instead, the clause must be read in the context of the entire employment agreement.
That may sound like a technical distinction, but it is an important one for Ontario employers.
How Did “At Any Time” Become A Problem?
Historically, it was common to see termination clauses that said something along the lines of:
“The Employer may terminate your employment at any time without cause by providing you with the minimum entitlements required by the ESA.”
The purpose was straightforward. The employer wanted the ability to terminate the employee without cause while limiting its obligations to the minimum amounts required by Ontario law.
Then came Dufault v. The Corporation of the Township of Ignace.
In Dufault, the employment agreement stated that the employer could terminate the employee “at any time” and “in its sole discretion.” The Ontario Superior Court found the provision unenforceable because the wording could theoretically give the employer the right to terminate an employee in circumstances where the ESA prohibited termination — for example, because the employee was exercising certain statutory rights or was on a protected leave.
The concern was essentially this: if an agreement says the employer can terminate someone “at any time” and “in its sole discretion,” does that give the employer a contractual right to terminate even when the law says it cannot?
The court said yes, and therefore found the clause violated the ESA.
The Ontario Court of Appeal later considered Dufault, but did not decide the “at any time” issue because it found another part of the termination provision unenforceable. This left employers with considerable uncertainty.
The Uncertainty Spread
Following Dufault, the phrase “at any time” became something of a red flag in Ontario employment contracts.
The concern was not limited to agreements containing the exact wording used in Dufault. In Baker v. Van Dolder’s Home Team Inc., an Ontario Superior Court judge subsequently found a termination clause unenforceable even though it did not contain the words “sole discretion.”
The clause simply said that the employer could terminate the employee “at any time” without cause, while also providing that the employee would receive the minimum entitlements required by the ESA.
The court nevertheless followed the reasoning in Dufault and found the “at any time” language problematic.
This created a difficult situation for employers. “At any time” is ordinary language used to describe the employer’s right to terminate an employment relationship. Yet its use could potentially invalidate an otherwise carefully drafted termination clause.
Similar concerns arose around phrases such as “at the discretion of the employer” and “for any reason.”
The concern was that these phrases could be interpreted as giving an employer an unlimited right to terminate, even where the ESA or another statute prohibited the termination.
The Court Of Appeal Says: Not So Fast
The Ontario Court of Appeal has now rejected that overly technical approach.
In Baker and Li, the Court considered termination clauses containing “at any time” and, in Li, “at any time and for any reason.”
The Court held that those words, by themselves, do not make a termination clause unlawful.
Instead, the entire agreement must be considered.
That is important because both agreements contained clear language confirming that employees would receive their minimum statutory entitlements under the ESA.
In other words, the Court was not prepared to assume that an employer and employee intended “at any time” to mean that the employer could ignore the ESA.
The Court took a practical approach: if the agreement repeatedly says that the employer will comply with the ESA and that the employee will receive their statutory minimum entitlements, it does not make sense to interpret one phrase in the agreement as giving the employer permission to violate the ESA.
The same reasoning applied to “for any reason.”
The Court found that this language simply meant that the employer did not have to establish a particular reason for a without-cause termination. It did not mean that the employer could terminate someone for an unlawful reason.
What About “At The Discretion Of The Employer”?
This is an important distinction.
Baker does not mean that employers can simply put whatever language they want into a termination clause.
The problem identified in Dufault arose from the combination of language giving the employer the ability to terminate “at any time” and “in its sole discretion,” which the court interpreted as potentially allowing the employer to terminate even where the ESA prohibited it.
The Court of Appeal has now made clear that courts should not automatically reach that conclusion simply because a termination clause contains words such as “at any time.”
Instead, the question is what the agreement, read as a whole, objectively means.
That means employers should still be cautious with broad discretionary language. There is little reason to use unnecessarily aggressive wording when a termination clause can simply and clearly state the employer’s right to terminate without cause while expressly preserving the employee’s statutory entitlements.
What Does This Mean For Employers?
The decision is good news, but it does not mean termination clauses are now automatically enforceable.
The Court of Appeal did not overturn Waksdale, which remains an important case in Ontario. Under Waksdale, if one part of an agreement’s termination provisions is unenforceable, the problem can potentially invalidate the entire termination scheme.
The safest approach remains to have termination provisions drafted carefully and reviewed regularly.
However, employers should no longer assume that the mere presence of “at any time” or “for any reason” automatically means that their termination clause is unenforceable.
The key is whether the agreement, when read as a whole, clearly demonstrates an intention to comply with the ESA.
For employers, the practical lesson is simple: termination clauses should clearly state that employees will receive their minimum statutory entitlements, including termination pay, severance pay where applicable, and benefits continuation. They should also be carefully drafted to address both without-cause and with-cause termination.
The Baker decision is a welcome move away from treating individual words as “magic words” that can automatically invalidate an employment agreement.
For the many Ontario employers whose existing agreements contain the phrase “at any time,” this decision may provide some welcome relief.
It also provides an important reminder that employment contracts should be interpreted based on what they actually say as a whole, not simply by picking out one phrase and assuming the worst.
