An “Exacting Standard”: the Enforceability of Termination Clauses and the “At Any Time” Conundrum

Written By David Cassin, Adam Walji and Thurka Brabaharan

Baker v Van Dolder’s Home Team Inc.¹ (Baker) is the latest decision in Ontario to conclude that a termination provision permitting an employer to terminate, without cause, “at any time” is contrary to the Employment Standards Act, 2000 (ESA) and therefore unenforceable.

While the Baker decision follows closely on the heels of another Ontario Superior Court decision impugning the use of “at any time” language in without cause provisions, it contradicts at least one other Ontario Superior Court decision where “at any time” language was endorsed by the Court.² The issue of “at any time” language has not yet been directly addressed by the Court of Appeal for Ontario.

Key Takeaways

• Termination provisions purporting to allow an employer to terminate an employee “at any time” may be unenforceable. For example, as the Court in Baker noted (following the analysis in Dufault v The Corporation of the Township of Ignace³ (Dufault)), employers are not permitted to terminate employees upon the conclusion of a protected leave or in response to an employee’s attempt to exercise a right protected under the ESA.
• Employers should review their employment agreements to ensure conformity with the ESA and the latest case law. Given the trend of employee-friendly decisions from the Ontario courts in recent years along with increased judicial scrutiny of employment agreements (and employers’ actions surrounding termination generally), employers should ensure their agreements are updated to align with best-practices.

The Decision

The Court first analyzed the “without cause” provision and summarily applied the reasoning from Dufault to determine that the “without cause” provision was unenforceable.

While the Court’s commentary in Dufault regarding the “at any time” language has been regularly cited by employees attempting to avoid the implications of the termination provisions in their employment agreements, it is arguable that its analysis is not the law because it was merely obiter commentary. As noted, no appellate authority has weighed in squarely on the issue.

When Dufault was appealed, the Court of Appeal expressly did not rule on the “at any time” language issue given that the “with cause” provision was unenforceable rendering the entire termination provision unenforceable.⁴ It noted that resolution of the issues regarding the “without cause” provision should be left to an appeal where it would directly affect the outcome.⁵

On finding that it was bound by Dufault and the entire termination provision was unenforceable, the Court in Baker also considered the “with cause” provision for the “sake of completeness”. The “with cause” provision provided that Mr. Baker could be terminated without notice or pay in lieu of notice for “just cause”. Though the provision contained certain “savings” language, the Court found the language was insufficient to save the otherwise unenforceable provision.

In closing, the Court in Baker acknowledged that employers in Ontario continue to be faced with an “exacting standard” for drafting termination provisions that has been difficult to attain.

What Happens Next?

The Baker decision raises questions about how the “at any time” language will be treated in future cases and whether the Court of Appeal will ultimately weigh in on the issue in the near term given its commentary in Dufault, leaving the door open for further consideration.

Elsewhere in Canada, the British Columbia Court of Appeal recently upheld a termination provision that permitted termination by the employer without cause “at any time”.⁶ While enforceability of the “at any time” language was not directly in issue in Egan, the Court emphasized a practical, common-sense approach to interpreting employment agreements, noting that “disaggregating the words in a termination clause looking for ambiguity as a means to find the clause unenforceable” is not the correct approach to interpreting employment agreements.⁷

In Ontario, the courts continue to scrutinize employment agreements for strict compliance with the ESA. To reduce the risk that an employment agreement is found to be offside the ESA and otherwise unenforceable, employers should regularly review the terms of their employment agreements with experienced employment counsel.

Bennett Jones has extensive knowledge and experience in labour and employment law and can help your business address any questions or concerns about the enforceability of termination provisions or other employment and labour matters. Please contact the authors or a member of the Bennett Jones Employment Services Group to learn more.

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