Are the scales balancing in favour of employers?

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In Ontario and much of Canada, the courts have been a loyal, dependable friend to the employee.

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Employment contracts have been rigorously reviewed, scrutinized and struck down for the inclusion of a stray word or phrase. Reasonable notice periods have been stretched, even for the very short service employee.

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But in the last 24 months, a recalibration of sorts is on the horizon. There have been a handful of court decisions that  have upheld termination provisions, giving employers a mini platform to stand on.

One such case this year is Li v. Wayfair Canada.

As a senior product manager, Song Li worked at Wayfair for about nine months in 2023 when he was terminated. At the time of termination he was 45 years old and earned $221,564 in base salary, received benefits, an RRSP match and was granted $73,017 in restricted share units (RSUs) that would vest a few months after his termination.

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When he was terminated, Li’s contract provided that he was entitled onto the minimum entitlements guaranteed under the Employment Standards Act. Given his short service, that amounted to one week’s pay and benefits. Wayfair provided Li that amount.

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Employment agreement contested

Li contested the enforceability of his employment agreement and sued for wrongful dismissal damages in the Ontario Superior Court.

At a summary judgment motion before Justice Grant Dow, Li argued that the termination clause in his contract was invalid because it allowed Wayfair to terminate him “at any time and for any reason.” Li argued this language violates the ESA by potentially allowing for terminations even when legislation would prohibit it.

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For example, the ESA provides employees with a number of protected leaves (including parental and medical leave). The logic follows then, that by including language that would allow Wayfair to terminate Li at “any time“ would notionally allow the company to terminate him during a job protected leave, a violation of the ESA.

Even though Wayfair did no such thing, the argument in court, embraced by a number of recent decisions, is that the “potential“ for the clause to violate the ESA (even if there was no actual misconduct) should render the clause unenforceable. Essentially a theoretical breach is equivalent to an actual breach.

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This time, Justice Dow refused to take that leap and rejected the idea that generic wording like “at any time” automatically undermines ESA rights. Instead, he adopted a practical approach: look at the contract as a whole.

The court found the clause clearly committed the employer to pay ESA minimums upon termination. Nothing in the agreement attempted to contract out of statutory protections.

The court’s decision brings a refreshing sense of balance back into the equation. It signals that courts may once again respect parties’ freedom to contract – especially when the clause complies with the employment legislation on its face. Employers can breathe a little easier knowing that clear, ESA-aligned contracts will not automatically be weaponized against them.

If Ontario wants a healthy labour market, employers need predictability. This case moves us back in that direction.

Have a workplace problem? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.

The content of this article is general information only and is not legal advice.

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