Another termination provision bites the dust: Baker v. Van Dolder’s Home Team Inc. Another termination provision bites the dust: Baker v. Van Dolder’s Home Team Inc.

Ontario’s Superior Court has struck down yet another set of termination provisions, this time in Baker v. Van Dolder’s Home Team Inc.^[1] The decision continues a line of employee-friendly authority that began with the Court of Appeal’s ruling in Waksdale v. Swegon North America Inc.^[2] and has most recently gathered steam in Dufault v. Ignace.^[3] Below we summarize Baker, analyze the Court’s reasoning and outline key takeaways for employers.

Factual background

In Baker, the plaintiff’s employment was terminated without cause. The Court was tasked with determining whether the termination provisions in the plaintiff’s employment agreement were enforceable and therefore effective in restricting the plaintiff’s common law entitlements upon termination. The relevant provisions are as follows:

1. Poor performance, after having been notified in writing of the required standard;
2. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
3. Theft, misappropriation or improper use of the company’s property;
4. Violent or harassing conduct towards other employees or customers;
5. Intentional or grossly negligent disclosure of privileged or confidential information about the company;
6. Any conduct which would constitute just cause under the common law or statute.

The decision

Justice Sproat began the analysis by looking at the “without cause” provision. Following the Superior Court’s decision in Dufault, Justice Sproat found that granting the employer the right to terminate “at any time” improperly implied an absolute right to dismiss that runs afoul of the Employment Standards Act, 2000 (ESA) and confirmed that the provision could not be saved by general language promising ESA compliance. As such, the provision was found to be unenforceable.

The Court could have stopped there, since a finding that any portion of a termination provision is unenforceable renders the entire termination provision unenforceable (see our previous post for more on this). However, Justice Sproat decided to address the “with cause” provision, as well, “for the sake of completeness”. Relying on Perretta v. Rand A Technology Corp.,^[4] Justice Sproat found the provision unenforceable because it

1. relied on a contractual standard of “just cause” that was less stringent than the ESA standard of wilful misconduct
2. failed to provide any detail or explanation regarding the wilful misconduct standard, including the fact that it differs from the contractual standard

Justice Sproat found that this gave rise to potential unfairness, as employees (apparently) cannot be expected to appreciate the differences between the contractual and statutory standards. Notably, the provision was not saved by the express language stating that employees terminated for cause would nevertheless be provided with “any minimum compensation or entitlements prescribed by the Employment Standards Act.”

Following the Dufault decision – correct outcome?

Justice Sproat found that the Court was obligated to follow the Dufault decision from the Superior Court based on principles of horizontal stare decisis, citing Hansard Spruce Mills Limited (Re)^[5] and the Supreme Court’s recent discussion in R. v. Sullivan.^[6] However, the existence of this obligation is arguable.

As noted in Sullivan, a decision may not be binding if it is distinguishable on its facts. In Dufault, Justice Pierce found that the “without cause” provisions contravened the ESA in part because they gave the employer “sole discretion” to terminate the employee’s employment at any time. Justice Sproat relied on this reasoning to find the “without cause” provision in Baker unenforceable, notwithstanding the fact that the provision did not include the offending “sole discretion” language. Furthermore, on appeal, the Court of Appeal in Dufault did not rule on whether the above language violated the ESA since it had already determined that the “with cause” portion of the termination provision was unenforceable. Given these points, Justice Sproat arguably had room to depart from Dufault and uphold the “without cause” termination provision. Such an outcome would have honoured the intentions of the employer to comply with the minimum standards set out in the ESA, which can be clearly ascertained from the employment agreement. However, as noted above, this may not have changed the ultimate result that was reached by the Court given the unenforceability of the “with cause” provision.

Moreover, by conflating the language “at any time” with “for any reason”, the decision in Baker arguably misapplies the operative provisions of the ESA which prohibit employers from basing a decision to terminate employment in reference to certain reasons, and not at any particular times. We also note that an earlier appellate decision out of British Columbia, Egan v. Harbour Air Seaplanes LLP,^[7] upheld a termination clause that included the phrase “at any time”, which arguably should have been persuasive on the trial court in Baker, especially since leave to the Supreme Court of Canada in Egan was denied in March 2025. In Egan, the British Columbia Court of Appeal reflected on the appropriate interpretative approach, noting that “[a]pplying the practical, common-sense approach to contractual interpretation, the termination clause in Mr. Egan’s contract was neither ambiguous nor non-compliant… and was therefore sufficient to rebut the presumption of reasonable notice.”

Takeaways for employers

Notwithstanding that, at the time of writing, employers in Ontario arguably have some scope to push back on the analysis in Baker and the application of that case to other contracts and facts, it remains prudent to factor in the full possible range of judicial outcomes when drafting or updating employment contracts.

1. Avoid “at any time” and “sole discretion” wording: Lower-court judges are increasingly finding it to be contrary to the ESA. Therefore, in the absence of appellate reconsideration in Ontario, employers are wise to redraft their without-cause termination provisions to ensure they do not purport to allow them to terminate employment “at any time” and/or in the company’s “sole discretion”.
2. Savings provisions may still not save you: Courts continue to refuse to “blue-pencil” termination provisions. A generic promise to comply with the ESA may not offer protection if the substantive wording of a provision misstates the law.
3. Stay informed and regularly review termination provisions: Given the rapid rate of change in this area of the law, employers should stay informed of new decisions and review their termination provisions for continued compliance. What would otherwise seem to be small linguistic choices — e.g., “sole discretion,” “at any time,” “for any reason” — can potentially invalidate an otherwise enforceable provision. At a minimum, employers should review and update templates annually.

Final thoughts

Baker confirms that Ontario courts remain hyper-vigilant in policing termination provisions, sometimes striking language that some practitioners may have considered benign less than a year ago. Whether the Court in Baker was correct in following Dufault may be open for debate; however, the practical message for employers is clear: assume the strictest possible scrutiny and draft accordingly. HR, legal and leadership teams that proactively update employment agreements will have a leg up in managing risk.

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[1] 2025 ONSC 952.

[2] 2020 ONCA 391.

[3] 2024 ONSC 1029, affirmed in 2024 ONCA 915.

[4] 2021 ONSC 2111.

[5] 1954 CanLII 253 (BCSC).

[6] 2022 SCC 19.

[7] 2024 BCCA 222, leave to SCC refused.