Baker and Li
The Ontario Court of Appeal’s recent decisions in Baker v. Van Dolder’s Home Team Inc. and Li v. Wayfair Canada ULC (heard together) have quickly become two of the most discussed employment law cases of 2026. Together, the decisions address, amongst other things, a question that has generated considerable litigation in recent years: can commonly used language permitting termination “at any time” or “for any reason” render an otherwise ESA-compliant termination clause unenforceable?
The Court of Appeal’s answer was largely “No.”
For employers, the decisions provide some desired guidance, and some welcome relief from technical attacks on their termination provisions. For employees and their counsel, however, the rulings do not eliminate challenges to termination clauses. Rather, they remove one or two avenues of attack while leaving many others intact.
The Background
The appeals arose from conflicting lower court decisions. In Baker, the motion judge found a termination clause unenforceable because language allowing termination “at any time” could theoretically permit dismissal in circumstances prohibited by the Employment Standards Act, 2000 (“ESA”). In Li, a similar clause was upheld because the agreement repeatedly preserved the employee’s ESA minimum entitlements.
Faced with these inconsistent outcomes, the Ontario Court of Appeal considered both appeals together. The Court ultimately endorsed a contextual and common-sense approach to interpreting employment contracts and concluded that language such as “at any time” or “for any reason” does not, on its own, violate the ESA when the agreement clearly preserves statutory minimum entitlements.
Impact
There is little doubt that these cases change the dynamics of termination clause disputes in Canada, particularly in Ontario.
Courts frequently scrutinize termination provisions with extraordinary precision. Clauses are sometimes invalidated based on hypothetical ESA breaches that could be inferred from isolated words or phrases. Employers often find themselves struggling to draft provisions that could survive increasingly technical judicial review, while employees often achieved substantial leverage by identifying drafting defects that had little connection to the practical operation of the contract.
The Court of Appeal’s decisions signal a retreat from that approach. However, in my opinion, this retreat is only relating to very specific terms.
The Story Continues
While Baker and Li close off one or two avenues for challenging termination provisions, they do not eliminate the many others that have developed in Canadian employment law. The decisions should not be interpreted as creating a blanket presumption that termination clauses are enforceable.
Termination provisions may still be challenged for a wide range of technical deficiencies. Problems involving benefits continuation language, severance entitlements, ambiguity (including ambiguity in accompanying documents), drafting inconsistencies, and other ESA compliance issues remain fertile ground for disputes. Even “potential” breaches of the ESA continue to put such clauses at risk.
In addition, avenues such as repudiation of contract remain powerful arguments in appropriate cases. Even where a termination clause is initially valid, employer conduct may give rise to disputes regarding whether the employer can continue relying on it. Baker and Li do not meaningfully alter that area of law.
The practical reality is that experienced employment lawyers will continue examining termination provisions and employer conduct with great care. The arguments may change, but the disputes are unlikely to disappear.
The Story Evolves: Intent
Perhaps the most interesting consequence of Baker and Li is what may happen next.
These decisions are likely to trigger increased disputes over an employer’s intent to comply with the ESA. Employers will undoubtedly point to the Court’s emphasis on reading agreements as a whole and giving effect to contractual language that expressly preserves ESA minimums. Employees, meanwhile, may argue that a declared intention to comply cannot save wording that is otherwise defective.
Historically, an employer’s subjective intent to comply with employment standards legislation has not been regarded as a determining factor when assessing the validity of a termination clause. The focus has generally been on the actual language used and whether the clause, properly interpreted, contravenes the ESA.
As future cases work through the courts, parties may debate whether Baker and Li have shifted that analysis. Some will argue that the decisions simply require contextual interpretation. Others may attempt to use them as support for a broader inquiry into whether the contract demonstrates an overarching intention to remain ESA-compliant.
Far From Over
Baker and Li provide much-needed clarity and common sense in an area of law that had become increasingly unpredictable. Employers can take comfort that routine phrases such as “at any time” and “for any reason” are no longer likely to invalidate otherwise compliant termination provisions.
Yet these decisions should be viewed as an evolution, not a revolution. They remove one weapon from the employee-side dispute toolkit, but many others remain available. Termination clauses will continue to be challenged on technical ESA grounds, contractual interpretation issues, and repudiation arguments.
In short, Baker and Li change the landscape of termination clause review, but they do not end the story.