Baker v. Van Dolder’s Home Team Inc.: Termination Provisions Under Scrutiny

Overview

Last year, in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029 (“Dufault“), the Ontario Superior Court of Justice invalidated a termination clause that allowed an employer to dismiss an employee “at its sole discretion” and “at any time.” In the recent case of Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 (“Baker“), the court reaffirmed the decision in Dufault and ruled that a termination provision allowing an employer to terminate an employee’s employment “at any time” is unenforceable.

While not required to do so, in Baker, the court also reviewed the enforceability of the “with cause” termination provision in the employment agreement (the “With Cause Provision“). The provision stated:

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:

1. Poor performance, after having been notified in writing of the required standard;
2. Dishonesty relevant to your employment (such as misleading statements, falsifying documents and misrepresenting your qualifications for the position you were hired for);
3. Theft, misappropriation or improper use of the company’s property;
4. Violent or harassing conduct towards other employees or customers;
5. Intentional or grossly negligent disclosure of privileged or confidential information about the company;
6. Any conduct which would constitute just cause under the common law or statute.

Under the Employment Standards Act, 2000 (the “ESA“), an employer cannot terminate an employee’s employment without notice of termination or severance pay unless the employee engages in wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and has not been condoned by the employer. If an employer dismisses an employee for any other reason, including just cause (being a potentially lower form of misconduct), it must provide the employee with their minimum statutory entitlements under the ESA. While a plain reading of the Without Cause Provision indicated that the employer would comply with this requirement, the court nonetheless found the provision unenforceable.

The court noted that the With Cause Provision described the contractual standard for just cause but did not provide details or clarification on the wilful misconduct standard under the ESA. The provision also failed to clarify that the ESA’s wilful misconduct standard differed from the contractual one. The court reasoned that since many employees may not be aware of the ESA provisions, they could wrongly assume they are not entitled to severance if they breach the contractual standards. Therefore, the court ruled that the With Cause Provision was illegal and unenforceable.

Takeaways

Both Baker and Dufault follow a line of cases that have invalidated employment agreements containing language once considered acceptable. These decisions serve as a cautionary reminder for employers to regularly review and update termination provisions in their employment agreements to ensure compliance with current legal standards. Promotions and restructurings provide ideal opportunities to conduct these reviews and revisions, helping employers reduce the risk of unenforceable termination provisions and avoid significant liability.

To read the full decision in Baker, click here.