Ontario Court of Appeal Clarifies Termination Clauses in Baker and Wayfair: “At Any Time” Is Not Automatically Fatal
On August 6, 2026, the Ontario Court of Appeal released an important employment-law decision addressing a question that had created significant uncertainty in Ontario: does a termination clause become unenforceable simply because it says an employer may terminate employment “at any time”?
In Baker v. Van Dolder’s Home Team Inc.; Li v. Wayfair Canada ULC, 2026 ONCA 568, the Court of Appeal answered that question: not by those words alone.
The Court allowed the employer’s appeal in Baker and dismissed the employee’s appeal in Li v. Wayfair. In both cases, the Court concluded that the challenged termination provisions, read in the context of the agreements as a whole, reflected an objective intention to comply with the minimum standards of Ontario’s Employment Standards Act, 2000 (“ESA”).
For Ontario employees and employers dealing with employment contracts and termination clauses, the decision provides important appellate guidance on how those clauses should be interpreted.
Why Were the Words “At Any Time” a Problem?
Ontario employment agreements commonly state that an employer may terminate employment “at any time” without cause, provided the employee receives the compensation required by law.
The concern was that the ESA prohibits termination in certain circumstances. For example, the legislation contains protections concerning statutory leaves and reprisals. A strictly literal reading of “at any time” could therefore suggest that an employer had reserved a contractual right to terminate employment even in circumstances prohibited by statute.
That reasoning had contributed to the termination provisions in Baker being found unenforceable at first instance.
The Court of Appeal rejected an approach that isolates those words from the rest of the agreement.
What Did the Ontario Court of Appeal Decide?
The Court emphasized that an employment contract must be interpreted as a whole. The objective is to determine what the parties objectively intended from the language they used, while also recognizing the special principles that apply to employment agreements and the protective purpose of employment standards legislation.
In Baker, the without-cause provision expressly tied the employee’s termination entitlements to the minimum requirements of the ESA. The agreement also preserved ESA minimum compensation in the event of a termination for cause.
In Li v. Wayfair, the agreement permitted termination “at any time and for any reason,” but repeatedly preserved statutory minimum entitlements.
The Court concluded that those phrases did not objectively communicate an intention to authorize an unlawful termination. Instead, “at any time” addressed when a lawful without-cause termination could occur, and “for any reason” reflected that an employer need not establish cause for a lawful without-cause termination.
Ontario Court of Appeal decisions can be searched through the Court’s official decision database.
Context Matters More Than Isolated Words
One of the most significant aspects of Baker is the Court’s rejection of a “magic words” approach to employment-contract interpretation.
That does not mean employers may contract out of the ESA. Section 5 of the ESA continues to prohibit agreements that provide less than minimum employment standards.
But the decision draws an important distinction between contractual language that actually provides an unlawful entitlement and language that can only be made unlawful by removing it from its contractual context or assigning it an implausible meaning.
That distinction may affect future wrongful dismissal claims involving termination clauses.
The Court Also Addressed “Cause” Language
The decision was not limited to “at any time.” The Court also considered the cause provision in Mr. Baker’s agreement.
The agreement defined just cause broadly, but expressly preserved any minimum compensation or entitlements required by the ESA. The Court held that this was not rendered unenforceable simply because the contract did not explain the legal distinction between contractual cause, common-law just cause, and the ESA’s statutory misconduct standard.
The practical point is that the entire clause matters. An agreement that actually removes a statutory minimum remains vulnerable, but a court should not assume a statutory violation merely because the contract does not reproduce the legislation word-for-word.
Does Baker Mean Every Termination Clause Is Now Enforceable?
No.
Baker does not give blanket approval to termination clauses, and it does not prevent courts from invalidating agreements that actually contract out of minimum employment standards.
The wording of the full agreement remains critical. So do the circumstances in which the agreement was entered into and the legislation in force when the termination occurs.
For employers, the decision is a reason to have contracts reviewed rather than assuming older wording is safe. Vanguard Law assists Ontario employers with employment agreement drafting and review and with wrongful dismissal defence.
For employees, it is equally important not to assume a termination clause is enforceable—or unenforceable—based on one phrase. Before accepting a severance package or signing a release, the complete agreement should be reviewed.
What Should Ontario Employees and Employers Do Now?
Employees who have been terminated: Do not assume the amount offered by your employer is the maximum you can receive. Whether a termination clause limits your entitlements depends on its wording, the contract as a whole, the ESA, and the applicable case law.
Employers: The decision provides useful guidance, but properly drafted employment agreements remain important. Existing contracts should be reviewed periodically, especially where termination provisions were drafted around earlier cases that took a different approach.
Executives and employees with significant compensation packages: Termination issues can involve more than salary. Bonuses, commissions, benefits, equity compensation and other incentive arrangements may materially affect the value of a claim.
Have You Been Terminated or Are You Reviewing an Employment Contract?
Small differences in contractual language can have significant financial consequences. Vanguard Law can review an employment agreement, termination package and potential entitlements before you make a decision or sign a release.
You can also contact Vanguard Law to discuss your situation.
This article provides general legal information only and is not legal advice. Employment-law outcomes depend on the specific facts, contractual language and law applicable to each case.