Ontario Courts Still Taking a Strict Approach to Termination Clauses in 2025

In Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952, the Ontario Superior Court of Justice confirmed that Ontario courts will closely examine termination clauses and strike them down if they do not strictly comply with the Employment Standards Act, 2000 (ESA).

Background

The employee was terminated without cause on May 24, 2023. His contract provided terms for resignation, termination without cause, and termination with cause.  The key parts read:

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.

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; (c) Theft, misappropriation or improper use of company property; (d) Violent or harassing conduct towards 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 common law or statute.

After he was terminated, the employee made a claim for wrongful dismissal. The company argued that its contract limited the notice entitlement to ESA minimum.  The main issue was whether these termination clauses were valid.

Decision

The Court found both clauses unenforceable.

First, the “without cause” clause said the company could end employment “at any time.” The Court held this wording was too broad because the ESA does not allow dismissal in all situations. For example, an employee cannot be fired for taking parental leave or for asserting ESA rights. The Court relied on the Ontario decision in Dufault v. The Corporation of the Township of Ignace, for this proposition.  The Court held that a general promise to comply with the ESA cannot fix this type of problem.

Second, the “with cause” clause failed too. Under the ESA, an employer can only refuse minimum notice or termination pay if the employee has been guilty of wilful misconduct or wilful neglect of duty that is not trivial.  The contract’s definition of just cause included things like poor performance or dishonesty, which might not meet the higher ESA standard of wilful misconduct. The Court applied the reasoning that where there is any risk that an employee might wrongly lose ESA minimums, the clause cannot stand. Employees cannot be expected to understand the difference between common law just cause and wilful misconduct under the ESA.

Since both parts of the termination clause were invalid, the company could not rely on the termination clause.  The employer’s motion for summary judgment was dismissed.  The damages owing to the employee would be decided later.

Key Takeaways for Employers

This case shows again that termination clauses must be carefully drafted to align with the ESA, especially in Ontario. 

Employers in Ontario should avoid wording that suggests they can fire an employee “at any time” or for conduct that falls below the wilful misconduct standard.  A generic promise to comply with the ESA is not enough to fix flawed language. If part of a termination clause breaches the ESA, the whole provision can be struck down, exposing employers to much larger common law notice payments.

Some of the reasoning in this and other Ontario decisions may not be applicable to employers in British Columbia.  For a competing example in British Columbia, please see our blog post regarding the BC Court of Appeal decision in Egan v Harbour Air Seaplanes here.

For questions about this topic or any other workplace law matters, please reach out to Scott Marcinkow or a member of our Workplace Law team. You can also explore more insights by browsing our latest blog posts here.