Why the Court of Appeal’s recent decision on termination clauses matters
Exclusive to Canadian HR Reporter from Rudner Law.
In employment law, the termination provision in a contract is a high-stakes clause. If written correctly, it can limit what an employer must pay an employee upon dismissal to the bare minimums required by the Employment Standards Act, 2000 (ESA), roughly 34 weeks at most.
However, if the clause is found to be legally flawed, the employer might instead owe common law notice, which can reach as high as 30 months of pay.
Because the financial stakes are so high, courts have spent years debating exactly which words make these clauses enforceable. For a long time, legal experts relied on a few classic cases like Waksdale to guide them. But in early 2024, a new case called Dufault threw the industry into a tailspin.
In Dufault, a judge ruled that using the common phrase "at any time and for any reason" made a termination clause unenforceable. The reasoning was that this phrase could technically allow an employer to fire someone even for illegal reasons, such as taking a pregnancy/parental leave or exercising rights under the ESA. For a while, thousands of employment contracts across Ontario were suddenly at risk of being considered worthless.
Following this, two conflicting decisions emerged: Baker v Van Dolder’s Home Team (which followed the Dufault logic) and Li v Wayfair Canada (which did not). Both were appealed to the Court of Appeal for Ontario, the...
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