Written on behalf of Peter McSherry
Employment contracts can make or break a wrongful dismissal case. Courts won’t hesitate to strike it down if a termination clause doesn’t align with Ontario’s Employment Standards Act (ESA).
That happened in Baker v. Van Dolder’s Home Team Inc., where an employer’s termination provisions didn’t hold up under legal scrutiny. This case is another reminder that poorly drafted contracts can backfire, exposing employers to significant financial liability.
A Termination Gone Wrong: Baker v. Van Dolder’s Home Team Inc.
The plaintiff employee worked for the defendant employer, Van Dolder’s Home Team Inc., until he was terminated without cause on May 24, 2023. His employment contract contained termination clauses that limited his entitlements to the Employment Standards Act minimums. It also included a “just cause” provision, which listed various types of misconduct that could justify termination without severance.
When the company moved for summary judgment to dismiss the employee’s wrongful dismissal claim, the case came down to whether those termination clauses were legally enforceable.
“Without Cause” Clause Was Flawed
The employment contract stated that the company could terminate the employee “at any time” with minimum notice and severance under the Employment Standards Act (ESA). However, the ESA doesn’t allow employers to fire workers at any time. The court ruled that this language was misleading and unenforceable.
Referencing Dufault v. The Corporation of the Township of Ignace, the judge reaffirmed that termination clauses must not overreach by granting employers unlimited discretion to fire employees.
“With Cause” Clause Didn’t Meet Employment Standards
The employer’s contract also allowed termination for reasons like poor performance, dishonesty, and other general misconduct. However, under Ontario employment law, an employee is only disentitled to notice and severance if they engage in “wilful misconduct.” That means their actions must be intentional, serious, and unapproved by the employer.
Citing Perretta v. Rand A Technology Corporation, the court held that if a termination clause sets a lower standard than the ESA, it’s invalid. Since the company’s contract didn’t make the correct legal distinction, the entire provision was struck down.
One Bad Clause Spoiled the Whole Contract
The Ontario Court of Appeal’s decision in Waksdale v. Swegon North America changed how courts assess termination provisions. It established that if any part of a termination clause violates the Employment Standards Act, the entire clause—both “with cause” and “without cause”—must be voided.
Since the employer in Baker’s “with cause” clause didn’t meet ESA standards, the court ruled that the “without cause” clause also couldn’t stand. That left Baker entitled to common law reasonable notice instead of the ESA minimums, which could mean significantly higher damages (to be determined at a subsequent hearing).
Lessons for Employers From Baker v. Van Dolder’s Home Team
Review Employment Contracts for ESA Compliance
Employers must ensure that their termination clauses comply with the Employment Standards Act or risk having them invalidated. Small mistakes—like saying an employee can be fired “at any time”—can have significant legal and financial consequences.
Tighten Up “Just Cause” Language
Many employers assume that they can fire employees without notice if they list misconduct reasons in a contract. However, courts may invalidate the language unless that language aligns with the ESA’s “wilful misconduct” standard.
One Clause Can Doom The Whole Contract
A single bad clause can ruin an otherwise solid contract. Courts don’t allow employers to pick and choose which parts to enforce. If one section contradicts the Employment Standards Act, the entire termination framework may collapse.
Important Takeaways for Employees
Don’t Assume Your Contract is Set in Stone
Just because your employer gave you a contract doesn’t mean the termination provisions are legally valid. If you’re fired, have a lawyer review your agreement to ensure you receive the compensation you are entitled to.
“Just Cause” Termination Isn’t Always Justified
If you’ve been let go for cause, your employer must meet the Employment Standards Act’s strict “wilful misconduct” threshold to deny you severance. Many contracts fail to make this distinction, which could mean you’re still owed compensation.
Common Law Notice Could Be Higher Than ESA Minimums
If your termination clause is ruled unenforceable, you could be entitled to significant severance under common law instead of just a few weeks’ pay under the ESA. It’s always worth getting legal advice to explore your options.
Contact Peter A. McSherry Employment Lawyer for Thorough Advice on Termination Clauses
The Baker v. Van Dolder’s Home Team Inc. case is a textbook example of how employers can land in legal trouble by using outdated or improperly drafted termination clauses. At Peter A. McSherry Employment Lawyer, we provide comprehensive advice to clients on how termination clauses interact with the Employment Standards Act. We help employers draft new agreements and review existing contracts to ensure compliance. We also advise employees on their rights at any stage of the employment agreement, from signing to severance.
Our firm proudly serves clients in Guelph and across the surrounding areas. To schedule a consultation on your employment law matter, please contact us online or call 519-821-5465.