WHAT'S NEW AT IFW
- Partner Carita Wong will be speaking at Osgoode Hall Professional Development's Human Resources Law for HR Professionals course on March 20, 2025.
- Partner Behzad Hassibi will be speaking at Osgoode Hall Professional Development's Human Resources Law for HR Professionals course on April 10, 2025.
WHAT'S NEW IN THE LAW
Ontario decision holds that a without cause termination provision stating that an employer may terminate an employee's employment "at any time" is illegal and void
In the very recent decision of Baker v. Van Dolder's Home Team Inc., 2025 ONSC 952, the Ontario Superior Court of Justice examined the following termination provisions:
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2. Termination without cause: we may terminate your employment at any time, without just cause, upon providing you with only the minimum notice, or payment in lieu of notice and, if applicable, severance pay, required by the Employment Standards Act. If any additional payments or entitlements, including but not limited to making contributions to maintain your benefits plan, are prescribed by the minimum standards of the Employment Standards Act at the time of your termination, we will pay same. The provisions of this paragraph will apply in circumstances which would constitute constructive dismissal.
3. Termination with cause: we may terminate your employment at any time for just cause, without prior notice or compensation of any kind, except any minimum compensation or entitlements prescribed by the Employment Standards Act. Just cause includes the following conduct:
- Poor performance, after having been notified in writing of the required standard;
- Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
- Theft, misappropriation or improper use of the company's property;
- Violent or harassing conduct towards other employees or customers;
- Intentional or grossly negligent disclosure of privileged or confidential information about the company;
- Any conduct which would constitute just cause under the common law or statute.
The court held that the termination provisions were null and void based on the following:
- The with cause termination clause did not differentiate between the common law standard of just cause and the higher Employment Standards Act, 2000 ("ESA") "willful misconduct" standard (i.e., items in the list failed to meet the higher ESA standard required to disentitle an employee to notice of termination or termination pay or severance pay ). The court followed the decision in Perretta v. Rand A Technology Corporation, 2021 ONSC 2111 and specifically rejected the submission that the language of "except any minimum compensation or entitlements prescribed by the Employment Standards Act" saved the clause. The court noted the "unfairness" of such language "[g]iven that many employees will not be familiar with the ESA provisions, many employees would assume that they had no entitlement if they breached the contractual standards."
- Regarding the without cause provision, the court stated that it was bound by an earlier decision in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029 (the topic of our March 2024 newsletter), and found that the clause was unenforceable because "the ESA does not permit an employer to terminate employment 'at any time.'" The court differentiated another recent decision that found a without cause termination clause to be enforceable (Bertsch v. Datastealth Inc., 2024 ONSC 5593), finding that case to be distinguishable because "there was no 'with cause' provision that conflicted with the ESA."
The court's finding that the "at any time" time language rendered the without cause termination provision null and void appears to be a further extension of last year's Dufault decision, as the court in Dufault also relied on "sole discretion" language in ruling that the without cause provision was void ("sole discretion" was not present in the without cause provision in the Baker case). We note that to the extent the court's statement that the "ESA does not permit an employer to terminate employment 'at any time'" relates to the requirement for reinstatement after protected statutory leaves, s. 53(2) of the ESA specifically states that the requirement "does not apply if the employment of the employee is ended solely for reasons unrelated to the leave". As such it is our view that employment can be terminated "at any time" so long as it's not for an improper purpose. Unfortunately, this specific point was not addressed in the Baker decision.
The Court of Appeal explicitly declined to rule on the "at any time" and "sole discretion" line of reasoning when Dufault was appealed (the decision was upheld on other grounds), and it remains to be seen whether Baker will be appealed. Until such time as the Court of Appeal definitively rules on this topic, we expect that employees' counsel will rely on the Baker and Dufault decisions to challenge any terminated-related language containing "at any time" or "sole discretion" – including when such language is contained outside of the actual termination section (e.g., in the benefits section).
In the circumstances, we strongly recommend that you contact a member of our team to review your employment agreement templates to minimize possible employer liability resulting from this recent application of the ESA to termination clause enforceability.
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