Your Employment Contracts Are Not Risk Management Tools If They Don’t Survive Litigation

Employment agreements are often treated as risk management tools. Employers rely on them to set workplace expectations and limit liability on termination. But an agreement only serves that purpose if it actually survives judicial scrutiny, and for the past few years, termination clause litigation in Ontario has increasingly turned on whether a court can find some theoretical reading of a clause that would violate the Employment Standards Act, 2000 ("ESA"), even where that plainly is not what the parties meant.

The Ontario Court of Appeal's recent decision in Baker v. Van Dolder's Home Team Inc.; Li v. Wayfair Canada ULC, 2026 ONCA 568, resolves that uncertainty, at least for now. The two appeals involved nearly identical without-cause language permitting termination "at any time" or "at any time and for any reason," yet two different motion judges had reached opposite conclusions on whether that language conflicted with the ESA. The Court of Appeal used the two cases together to