Baker, Li, and Wigdor: What Ontario's New Termination Rulings Mean for Employees

Ontario's Court of Appeal decided three employment appeals on August 6 and 7, 2026, and the results ran in both directions for employees. In Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568, a single set of reasons resolving two appeals, the Court upheld termination clauses limiting departing employees to their minimums under the Employment Standards Act, 2000. It then struck down a clause forfeiting an employee's equity awards on termination, opening a question many employees never think to ask.

Both halves matter to anyone assessing a severance offer, because the first decides which measure of notice applies and the second decides what counts as compensation during it. Employees who want to see what is at issue can estimate the common law severance range and set it against the statutory floor. This article explains what the Court decided in each case, which employee arguments survived, and what the rulings change in practice.

What did the Court of Appeal decide in Baker and Li?

The Court upheld both employers' termination clauses and resolved a split between two lower court judges. It allowed the employer's appeal in Baker, overturning a motion judge who had struck the clauses down, and it dismissed the employee's appeal in Li. In both cases the Court found the contracts preserved the employee's ESA minimums, so the clauses stood.

The two cases reached the Court from opposite directions on nearly identical wording, which is why it heard them together and resolved them in one judgment. In Baker v. Van Dolder's Home Team Inc., 2025 ONSC 952, the motion judge held that the phrase "at any time" conflicted with ESA prohibitions on terminating in certain circumstances, such as following a statutory leave or as a reprisal, and struck down both the without-cause and with-cause provisions. In Li v. Wayfair Canada ULC, 2025 ONSC 2959, a different motion judge upheld comparable language, finding the contract as a whole sought only to exclude common law damages while preserving the statutory minimums.

The employees themselves had little in common. Mr. Baker was a 71-year-old controller with about two and a half years of service, entitled to two weeks under the ESA, who turned down four weeks in exchange for a release and sued instead. Mr. Li was a 45-year-old senior product manager earning over $220,000 who had worked less than a year and received his one statutory week. Both lost, and both were ordered to pay costs: $2,500 in Baker and $10,000 in Li.

The Court of Appeal preferred the second approach. Reading the provisions literally and in isolation, without regard to the parties' objective intentions or the rest of the agreement, was untenable. In Baker, accepting the employee's argument would have required concluding that the employee intended to contract out of his own statutory entitlements and that the employer intended to break a statute its contract repeatedly promised to follow. The Court found that implausible.

Why did "at any time" stop working as an argument?

The Court held that "at any time" and "for any reason" reflect only that a termination is valid whenever it happens, provided the employee receives their contractual and statutory entitlements. On that reading, the words say nothing about an employer's intention to terminate unlawfully. They restate a right every employer already has rather than claiming one the ESA withholds.

The practical reach of this holding is wide, because the phrase appears in an enormous number of Ontario employment contracts. Decisions in the Dufault line had treated it as overstating the employer's rights, and for a period employees could point to those words alone and put a clause in serious doubt. That route has now closed.

Employees whose contracts contain this language need a different argument. The phrase itself no longer carries one.

When is a termination clause genuinely ambiguous?

The Court set a narrower test than employees had been arguing for. A provision is not ambiguous merely because someone can identify multiple possible or hypothetical readings. Genuine ambiguity arises only where two or more reasonable but differing interpretations survive a reading of the entire contract, and the Court said judges should not strive to find ambiguity where none reasonably exists.

That single sentence explains most of what changed. Several successful employee arguments in recent years worked by constructing a scenario in which a clause would fall below the statutory floor, then arguing the clause failed because that scenario was possible. The Court has now said that possibility is not enough, and that hypothetical unfairness does not render a termination clause unenforceable.

The Court also rejected a related argument from the motion judge in Baker, who had struck down a with-cause provision partly because an unsophisticated employee might misread it as denying statutory entitlements in every case. A clause does not fail because a reader might misunderstand it.

What the contract said elsewhere carried real weight. Mr. Baker's agreement contained a separate clause promising the employer would comply with the ESA at all times and that the statute would prevail over any inconsistent term. The Court treated that promise as confirming what "at any time" meant in the termination provision. Employees reading their own contracts should expect a clause of that kind to strengthen the employer's position rather than weaken it.

What did the Court say about for-cause clauses?

The Court upheld the with-cause provision in Baker even though the contract defined cause more broadly than the ESA's wilful misconduct standard. What saved it was an express preservation of the minimum compensation and entitlements the ESA prescribes. A provision fails only where its drafting is broad enough to deny ESA entitlements in circumstances that fall short of wilful misconduct.

That test is more useful to employees than the older phrasing, because it identifies exactly what to look for. The recent decisions striking down for-cause clauses involved provisions denying all notice and compensation for conduct meeting a contractual or common law cause standard that fell short of wilful misconduct. Mr. Baker's clause did not, because it carried an express exception preserving his ESA entitlements. The Court confirmed that employers may incorporate ESA entitlements by reference rather than spelling them out.

The Court added that a clause does not fail merely because it leaves the complicated relationship between common law just cause and ESA wilful misconduct unexplained. The two standards themselves have not moved, and an employer alleging cause still bears the burden of proving it, as the for-cause analysis in Ontario sets out.

What did Wigdor decide about stock units and equity awards?

Employees won this one, and the award dwarfed what was at stake in Baker and Li. In Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, released the following day, the Court held that terms forfeiting share units on termination breach section 60(1)(a) of the ESA, which bars an employer from altering any term of employment during the statutory notice period.

The Court increased the employee's damages by US$4,711,647.29 for units that would have vested during his notice period.

The Court also rejected the employer's argument that the ESA applied differently because the employment arose from a commercial share purchase, and refused to read the contract more strictly against the employee because he had counsel when he signed.

For employees whose compensation includes share units, options, or long-term incentive awards, the decision opens a question severance discussions routinely ignore. Our full report on what Wigdor means for equity compensation covers the reasoning, the limits the Court set, and the arguments the employer lost.

What changed and what stayed the same?

The decisions narrowed which drafting features count as an ESA violation, and they left every other part of the framework alone. The table below separates the two, because commentary on these rulings has tended to blur them, and an employee reading that a clause "survived" can easily conclude more changed than actually did.

Changed by the August 2026 decisions	Unchanged
"At any time" and "for any reason" no longer invalidate a clause on their own	The Waksdale principle: one ESA defect in a termination provision can void the whole provision
Hypothetical readings and possible unfairness no longer establish ambiguity	Clauses that provide less than the ESA minimums in any scenario remain void
A cause definition broader than the ESA standard is not fatal where the clause preserves statutory entitlements	Benefits must continue through the statutory notice period, and clauses cutting them off stay vulnerable
Equity forfeiture on termination conflicts with section 60(1)(a) of the ESA	The common law reasonable notice range applies wherever no enforceable clause displaces it

What arguments do employees still have?

Several routes to unenforceability survive untouched. A clause providing less than the statutory minimums in any circumstance remains void. A clause stopping benefits before the statutory notice period ends remains vulnerable, and Wigdor extends that logic to other terms of employment. Waksdale still carries any one of these defects across the whole provision.

The Machtinger rule also survives, and it decides what a successful challenge is worth. A clause falling below the ESA is void rather than merely topped up, and the entitlement reverts to common law reasonable notice rather than to the statutory floor the clause was aiming at. That remedial rule is what gives clause defects their financial significance.

What has changed is the strength of the starting position. An employee now needs to identify a real inconsistency with the statute rather than a possible one, and the Court has signalled it will not strain to find conflicts in contracts that plainly preserve the minimums.

Do these rulings mean your termination clause is enforceable?

No reader can draw that conclusion from these decisions. Baker and Li held that two particular contracts preserved the statutory minimums in every scenario the ESA addresses. Whether any other clause does the same depends entirely on its own wording, read as a whole, and that assessment belongs to a lawyer with the contract in front of them.

The analysis continues to run in one direction only. A review can identify reasons a clause fails. No review, and certainly no plain reading by an employee, confirms that a clause is enforceable, because the grounds of invalidity are numerous and continue to develop. Wigdor is itself an example, since it found a defect in a document many employers would not have thought of as a termination clause at all. The broader framework appears in our guide to termination clause enforceability in Ontario.

What do these decisions change for someone reviewing an offer?

Less than the headlines suggest, and the change cuts both ways. The gap between an employer's offer and the common law range remains the substance of every severance negotiation, and that gap closes only if an enforceable clause displaces the common law. Employers citing these decisions in a severance letter are asserting a conclusion rather than proving one.

Equity compensation now deserves a place in that assessment alongside salary, bonus, benefits, and pension. Employees weighing an offer that relies on a termination clause, or that says nothing about unvested equity, can book a consultation with a licensed Ontario employment lawyer before signing any release.

Frequently Asked Questions

Q1: What did the Court of Appeal decide in Baker and Li?

The Court of Appeal upheld the employers' termination clauses in both cases and resolved a split between two lower court judges who had reached opposite conclusions on similar wording. In Baker v. Van Dolder's Home Team Inc., the Court allowed the employer's appeal and overturned a motion judge who had struck the clauses down. In Li v. Wayfair Canada ULC, the Court dismissed the employee's appeal and left the clauses standing. The reasoning was the same in each case. Both contracts stated clearly and repeatedly that the employee would receive no less than the minimum entitlements the Employment Standards Act, 2000 requires, so the Court found no reason to hold them unenforceable.

Q2: Does a termination clause still fail because it says the employer can terminate 'at any time'?

No, not on that basis alone. In Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568, the Court held that phrases such as "at any time" and "for any reason" reflect only that a termination is legally effective whenever it occurs, provided the employee receives their contractual and statutory entitlements. Contractual rights remain subject to statute, so the words do not exempt an employer from the Employment Standards Act, 2000. The contrary holding came from the Superior Court decision in Dufault, and the Court of Appeal expressly declined to decide the point when that case reached it, so the proposition was never appellate authority. Employees with this wording now need a different route to challenge enforceability.

Q3: When is a termination clause genuinely ambiguous?

The Court of Appeal set a narrower test than employees had been arguing for. A provision is not ambiguous merely because someone can identify multiple possible or hypothetical readings of it. Genuine ambiguity arises only where two or more reasonable but differing interpretations survive when the provision is read in the context of the entire contract, and the Court said judges should not strive to find ambiguity where none reasonably exists. The Court also rejected the argument that a clause fails because an unsophisticated employee might misread it.

Q4: Did Baker and Li overturn the Waksdale rule?

No, and Waksdale survived a direct attack. The employer in Baker asked the Court of Appeal to convene a five-judge panel to overturn it, and the Associate Chief Justice refused. The employer then argued the Court could reconsider Waksdale regardless, on the basis that it had been decided per incuriam, and the Court declined to take that up because it found both contracts compliant with the Employment Standards Act, 2000 and never reached the question. The principle stands: where one part of a termination provision violates the ESA, the entire provision can fail, including the parts that comply on their own. What the decisions narrowed is which drafting features count as a violation, not what follows once a court finds one.

Q5: What did Wigdor decide about stock units and equity awards?

Employees won that one. In Wigdor v. Facebook Canada Ltd., 2026 ONCA 572, the Court of Appeal held that agreement terms forfeiting restricted share units immediately on termination contravene section 60(1)(a) of the Employment Standards Act, 2000, which bars an employer from altering a term or condition of employment during the statutory notice period. The Court found the award agreements formed part of the employment terms, voided the forfeiture provisions, and increased the employee's damages by US$4,711,647.29 for the units that would have vested during his 10-month common law notice period.

Q6: Do these rulings mean my termination clause is enforceable?

No reader can draw that conclusion from these decisions, and the analysis still runs in only one direction. Baker and Li held that two particular contracts preserved the statutory minimums in every scenario. Whether any other clause does the same depends entirely on its own wording, read as a whole. A clause that falls below the minimums in any circumstance, cuts off benefits during the statutory notice period, or omits statutory severance pay remains vulnerable. Only a legal review of the specific contract can assess how a court would treat it.

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