Introduction
The first “Dufault” decision of 2025 is here. In Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, the Ontario Superior Court of Justice applied the precedent established in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, to a “without cause” termination provision that contained “at any time” language. Following Dufault, the Court found that the termination clause in this case was unenforceable. The Court also analyzed the contract’s “with cause” termination provision and guided this developing area of case law.
For more information on Dufault, which was recently affirmed on appeal in 2024 ONCA 915, please see our earlier publications here and here.
Background
In Baker, the plaintiff was terminated without cause on May 24, 2023. The employment contract contained a termination provision that allowed the employer to terminate the employee “at any time.” In such circumstances, it provided only the minimum notice, payment in lieu of notice, and severance payment entitlements under the Employment Standards Act, 2000 (the “ESA”). The plaintiff sued for wrongful dismissal, claiming the termination clause was unenforceable. The defendant applied for summary judgment, arguing the opposite.
The Contract
The termination provision in the relevant part provided as follows:
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:
a. Poor performance, after having been notified in writing of the required standard;
b. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
c. Theft, misappropriation or improper use of the company’s property;
d. Violent or harassing conduct towards other employees or customers;
e. Intentional or grossly negligent disclosure of privileged or confidential information about the company;
f. Any conduct which would constitute just cause under the common law or statute.
The Decision
Setting the Scene: Waksdale and Dufault
The Court began its analysis by referring to the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America, 2020 ONCA 391 (more on Waksdale here and here) and highlighting the precedent established therein: that if a portion of a termination provision is unenforceable, it renders the entire termination provision unenforceable.
The Court then detailed the legal principle of stare decisis, which means judges are bound mainly by precedent unless specific enumerated reasons or exceptions apply.
With the above in mind, the Court introduced the precedent established by the Superior Court in Dufault, which the Ontario Court of Appeal recently upheld. In Dufault, the lower Court determined that a termination provision will be unenforceable if it purports to give an employer the right to terminate an employee “at any time.” In the Court’s reasoning, such language is unenforceable because it conflicts with the ESA, insofar as the ESA does not grant unlimited authority to employers to terminate employees. Specifically, under the ESA, employees cannot be terminated in certain circumstances, such as after exercising statutory rights or following protected leaves. Therefore, an employee cannot, in fact, under the ESA, be terminated “at any time.”
The Court of Appeal agreed with the lower court that the “with cause” provision of the contract did not comply with the ESA. Therefore, it did not need to consider the “without cause” arguments. The Court “expressly” did not rule on that submission.
Notwithstanding the Court of Appeal’s non-engagement on the “without cause” provisions, the Court in Baker followed the Dufault reasoning.
The “Without Cause” Termination Provision
In applying Dufault to the facts in this case, Justice Sproat found that the “without cause” termination provision was unenforceable due to its inclusion of the “at any time” language, stating as follows in this regard:
[9] The plaintiff submits that this provision is unenforceable, as it states that the defendant is entitled to terminate employment “at any time”…
[10] On the authority of Dufault, the plaintiff’s “without cause” termination provision is unenforceable, as the ESA does not permit an employer to terminate employment “at any time”…
…
[12] I must apply Dufault, as none of the reasons to depart from a prior decision referenced in Spruce Mills are applicable. As such, the “without cause” termination provision is unenforceable.
Justice Sprout further found that the clause was not saved by the inclusion of general language confirming the employer would comply with the ESA.
The “With Cause” Termination Provision
For the sake of completeness, Justice Sproat also addressed whether the “with cause” provision was itself unenforceable, such that it would also operate to render the “without cause” provision unenforceable following Waksdale, detailed above.
Justice Sproat found that the “with cause” provision was also unenforceable on the basis that it established a higher and broader contractual standard for termination and related disentitlements for “just cause” than the “wilful misconduct” standard established under the ESA. Justice Sproat emphasized that this was unfair in the circumstances, given that employment contracts with regular employees are different than commercial contracts with lawyers:
[16] … If this was a commercial contract with lawyers involved, the parties would be taken to understand the difference between a contractual definition of just cause, the common law definition of just cause, and the ESA definition of wilful misconduct disentitling an employee to termination and severance pay… [A] regular employee cannot be expected to appreciate these differences.
…
[19] The potential unfairness of a termination provision of the sort at issue is that the employer has described in detail the contractual standard of just cause but given no detail or explanation of the ESA wilful misconduct standard, and that it differs from the contractual standard. Given 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.
Conclusion
As both the “with cause” and “without cause” termination clauses in this case were found to not comply with the ESA, the defendant’s motion for summary judgment was dismissed.
This case is another reminder of the precariousness of termination provision language and the corresponding importance of ensuring such language complies with the ESA and the evolving case law in this area.
As this case demonstrates, “at any time” language is liable to be struck down by the courts. Further, the case is noteworthy because of the “with cause” provision analysis. Many contracts have been amended post–Waksdale to include language similar to the impugned clause in Baker, which stated: “…except any minimum compensation or entitlements prescribed by the Employment Standards Act.” Justice Sproat’s decision suggests that contracts must explicitly describe the ESA standard of wilful misconduct to be enforceable. This significant finding will impact many contracts if Baker is followed in other decisions.
We are unaware of whether the Baker case will be appealed now. We will continue to follow the case and report on any developments.
If you need any assistance with your employment contracts, our team is here to help.
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