Termination clauses in Ontario have been in a flux for several years. Most recently, in 2024, the Ontario Superior Court ruled on the wrongful dismissal case of Dufault v. The Corporation of the Township of Ignace (“Dufault”) and found that that language in the termination clause was unenforceable. We previously wrote about the Dufault case in our blog post here. In Dufault, the offending language permitted the employer to terminate the employee “at its sole discretion” and “at any time”. The Court determined that this language permitted the employer to terminate during a job-protected leave of absence such as pregnancy leave, and therefore violated the Employment Standards Act, 2000. We previously wrote about the Dufault case in our blog post here, specifically about the appeal.
Shortly after Dufault, the Court took up the action of Baker v. Van Dolder ‘s Home Team Inc. (“Baker”), which also permitted the employer to terminate the employee’s employment “at any time”, and unsurprisingly the Court reached the same conclusion in Baker as it did in Dufault. This appeared to be the direction the courts were taking in prohibiting the “at any time” language in termination clauses in Ontario.
Enter Li and Wayfair
However, in Li v Wayfair Canada Inc., Justice Dow of the Ontario Superior Court, went in a different direction. The employment agreement between Li and Wayfair Canada, the parties in the dispute, contained similar language as follows:
“After your probationary period concludes, in the absence of Cause, the Company may terminate your employment at any time and for any reasons by providing you with only the minimum statutory amount of written notice required by the ESA or by paying you the minimal amount of statutory termination pay in lieu of notice required by the ESA, or a combination of both, as well as paying statutory severance pay required by the ESA, providing benefits continuance for the requisite minimum statutory period under the ESA and all other outstanding entitlements, if any, owing under the ESA.”
After reviewing this language, Justice Dow found that the language in Wayfair Canada’s contract must be distinguished from the wording in the Dufault case, but the Justice did not provide any reasoning for the distinction. Instead, Justice Dow focused on the termination clause “clearly and repeatedly” indicating that payment as required by the Employment Standards Act, 2000, would be made.
Analysis
The decision in Li v. Wayfair Canada Inc. does not grapple with the fundamental reasoning found in Baker and Dufault. Even if the termination clause states that ESA minimums will be paid, the decision appears to miss the argument that the termination clause is void because it violates the ESA for reasons aside from the adequacy of payment. The language in Li, does not appear to be any different than the language in Dufaultand Baker. The ESA does not permit an employer to terminate an employee during a job protected leave, which is why the outcomes in Dufault and Baker are aligned with interpretation principles applicable to the ESA as remedial legislation.
In Li v. Wayfair Canada, however, the court does not grapple with the same principles elucidated in Dufault and Baker. This is what it is not surprising that the Plaintiff in Li v. Wayfair Canada Inc. has decided to appeal the decision to the Ontario Court of Appeal. This is an excellent case to pursue as it may provide a final determination on whether the principles arising from Dufault and Baker will be upheld. Employers will likely wish that these principles are abandoned, but only time will tell at this point.
At Bridge Legal & HR Solutions, we specialize in providing expert legal advice with up-to-date knowledge of legislation. With our support, organizations can navigate these legal changes with confidence and integrity. To learn more about how we can support you, contact Bridge Legal & HR Solutions – (647) 794-5442 or at admin@bridgelegalhr.ca
