A recent decision from the Ontario Court of Appeal has resolved a long-standing discrepancy in employment law regarding the interpretation of termination clauses in employment agreements.
Specifically, several judicial decisions in Ontario have come to inconsistent conclusions regarding whether the use of the words “at any time” or “for any reason” invalidate what would otherwise be an enforceable termination clause limiting an employee’s entitlements at termination to legislative minimum requirements.
The Case
In Baker v. Van Dolder’s Home Team Inc.; Li v. Wayfair Canada ULC, 2026 ONCA 568, the Ontario Court of Appeal jointly heard the appeal of two lower court decisions which came to opposite conclusions regarding the use of “at any time” or “for any reason” language in a termination provision.
The Court of Appeal’s intention in hearing the cases together was to provide certainty for both employers and employees as to whether this type of language is enough to invalidate an otherwise enforceable termination provision.
In reaching its conclusion, the Court of Appeal applied a common sense approach to contractual interpretation. The Court of Appeal ruled that courts should consider the intent of the parties as set out in the employment agreement, rather than seek to find ways to deviate from that intent in favour of a hypothetical or highly technical contractual interpretation.
As stated by the Court: “The determination of the meaning of an employment contract is still an exercise in contractual interpretation. The modern approach to contractual interpretation has shifted away from technical and legalistic formulations and towards a ‘practical, common-sense approach’ that focuses on the objective intention of the parties in light of the words used and the surrounding circumstances…the overriding concern is to ascertain what the parties would have reasonably understood their words to mean and to ensure the parties’ objective intention is not thwarted by strict rules of interpretation…courts must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.”
In applying this approach, the Court determined the use of the words “at any time” or “for any reason” do not invalidate a termination provision if the surrounding language in the contract demonstrates a clear intention to comply with legislation and ensure that under no circumstance an employee would receive less than their minimum statutory entitlements.
Key Takeaways
While employment contracts will continue to face a higher level of scrutiny given the power imbalance between employers and employees, the Baker decision should be welcome news to employers.
The Court’s focus on the objective intentions of the parties to comply with the legislation demonstrates a significant shift toward a common sense-based approach to contractual interpretation in employment law.
However, it is still prudent to have an e2r® Advisor review and provide advice regarding an employee’s termination entitlements before the termination occurs.
Conclusion
If you have questions about the case, your organization’s employment contracts, or how this decision impacts internal planning for employee departures, please reach out to ClientCare to connect with an Advisor.