Termination clauses: Defaulting to Dufault

Exclusive to Canadian HR Reporter from Rudner Law.

If you’ve been keeping up to date with employment law decisions, then you’ve certainly heard of Dufault v The Corporation of the Township of Ignace, 2024 ONSC 1029 and of Baker v. Van Dolder ‘s Home Team Inc., 2025 ONSC 952.

In brief, Dufault made waves with its controversial ruling that language such as: “sole discretion” and “at any time” rendered a termination provision unenforceable as it potentially breached the Employment Standards Act, 2000 (ESA) by allowing employers using that language to terminate the employment relationship at times precluded by the ESA (for example, during statutory leaves or reprisal).

Baker then applied Dufault to strike a termination clause with the offending language, confirming that it is, at least for the time being, part of the law of the land in Ontario.

While many in the HR law bar thought that the reasoning in Dufault was a stretch, the fact that the court reached the conclusion it did was not all that surprising. This is because Dufault is just the latest in a series of decisions that have added to the list of offside language in employment agreements and termination clauses — that is, language that potentially breaches the ESA.

What is a bit surprising is the decision in the currently unpublished case Li v Wayfair Canada Inc, 2025 ONSC 2959. In Wayfair, the court ruled that the termination clause, which contained “at any time” in its wording, was enforceable. The court found that the language was distinguishable from that in Dufault and Baker — but provided no reasons for the distinction.

Roundup of termination clauses

Decisions upholding termination clauses are always welcome news for employers, but Wayfair is not a signal that our courts are charting a more employer-friendly approach:

• In Wayfair, the termination clause provided as follows:
  “The Company may terminate your employment at any time and for any reason… by providing you with only the minimum statutory amount of written notice required by the ESA”
• In Dufault, the offending termination clauses provided as follows:
  “The Township may at its sole discretion and without cause, terminate this Agreement and the Employee’s employment thereunder at any time upon giving to the Employee written notice.”
• And in Baker, the termination clause provided as follows:
  “We may terminate your employment at any time, without just cause.”

There is not much of a difference between the three clauses, so it is difficult to see why the language in Wayfair is not offside while that in Dufault and Baker is. The court did not provide guidance on why the wording in Wayfair was distinguishable.

It may be that the phrase “by providing you with only the minimum statutory amount of written notice required by the ESA” saved the clause, as it purports to provide the minimum required notice. However, that language is also in Baker.

Further, providing written notice of termination, while a requirement, is a different issue from the statutory limits on when employment can be terminated. Just because an employer provides the right amount of notice, in writing, does not necessarily mean that the termination did not breach the ESA.

For instance, providing proper notice for an employee on parental leave will not make the termination lawful. Finally, saving language has been found not to save a termination clause that breaches the ESA, so it can’t be said that that is what tipped the balance in Wayfair.

Ultimately, since the court did not provide reasons for its distinction between Wayfair and Dufault/Baker, we do not expect that it is a decision that will be followed. If anything, it creates unnecessary murkiness.

Uncertainty around enforceability

Given the uncertainty Wayfair created, and given that it is unlikely to be followed, employers are advised to continue avoiding extraneous language in their termination clauses. Even if Wayfair is followed, there is no reason to have language such as “at any time” and “sole discretion”.

It is still a best practice to keep language clear and to stick to only what is required to give effect to the parties’ intentions, to avoid creating any vulnerability in the contract. For the time being, expect Dufault to be the default.

In the end, Wayfair does make one thing clear — it can be very difficult to predict which termination clauses will be enforceable. That’s why it is always advisable to work with HR counsel to review, draft, and implement enforceable employment contracts.

David Gelles is an associate lawyer at Rudner Law in Toronto. He can be reached at (416) 864-8500 or [email protected].