By Barry W. Kwasniewski and Martin U. Wissmath

Charities and not-for-profits in Ontario need to be aware of the implications of Baker v Van Dolders Home Team Inc., 2025 ONSC 952, and the enforceability of termination provisions within employment contracts. In the employment relationship, clarity and legal compliance are paramount, and Baker serves as a reminder of the stringent standards to which employers are now held when drafting employment agreements. The Ontario Superior Court of Justice’s decision, released on February 11, 2025, addressed a summary judgment application stemming from a wrongful dismissal claim. Both the "with cause" and "without cause" termination clauses in the employment contract were found to be unenforceable. This ruling emphasizes the necessity for Ontario employers, including charities and not-for-profits, to carefully craft their employment contracts to ensure alignment with Ontario’s Employment Standards Act, 2000 (ESA) and relevant case law in recent years. The consequences of non-compliance can be significant, potentially leading to costly litigation, and damages for pay-in-lieu of reasonable notice at common law in amounts far higher than the ESA minimums.

The defendant employer, Van Dolders Home Team Inc. (the “Employer”), terminated its employment relationship with the plaintiff employee, Frederick Baker (the “Employee”), on May 24, 2023. The matter was presented to the court through affidavit evidence and written submissions, though the court sought further clarification through oral submissions on specific points of contention. The employment contract contained a "without cause" termination provision limiting the Employer’s obligations to the ESA minimums. The contract’s "with cause" provision permitted termination without notice or compensation for certain types of misconduct, including poor performance and dishonesty. The central issue according to the court was whether the "with cause" provision was enforceable. If not, the entire termination provision — including the "without cause" clause — would be invalidated following the precedent set in the Ontario Court of Appeal’s 2020 ruling in Waksdale v. Swegon North America.

The Employee also contested the validity of the “without cause” clause, referencing last year’s Dufault v. The Corporation of the Township of Ignace decision, which held that a without cause termination provision is invalid if it inaccurately represents the ESA, irrespective of any general statements affirming compliance with the ESA within the contract. The Employee argued that the clause improperly granted the Employer the right to terminate employment "at any time," which misstates the ESA, as it prohibits termination in specific circumstances, such as after a statutory leave or in reprisal for asserting ESA rights. The court found that such language renders the provision invalid, even if the contract later states that ESA minimums will be met. The court ruled that it was bound to adhere to Dufault, as there were no applicable reasons to depart from the precedent.

Turning to the "with cause" provision, the court examined whether it improperly disentitled the Employee to ESA termination and severance pay in situations that did not meet the ESA’s "wilful misconduct" standard as described in ESA Regulation 288/01. The provision listed several forms of "just cause" termination, including poor performance and breach of company policy, that fall short of the ESA’s threshold. Citing Perretta v. Rand A Technology Corporation, the court held that an employee unfamiliar with the ESA might wrongly assume they had no statutory entitlements upon termination for these reasons. Consequently, the "with cause" provision was found to be unenforceable.

The court found the Employer’s attempts to distinguish the case from Perretta unconvincing. In its ruling, the court highlighted the potential for unfairness when an employer specifies a contractual standard for just cause without adequately explaining its divergence from the ESA's "wilful misconduct" threshold. This lack of clarity can lead to confusion, as many employees might mistakenly believe they are not entitled to ESA requirements if they breach the contractual standards.

Applying the decision in Waksdale, the court ruled that the unenforceability of the "with cause" provision rendered the entire termination clause void. As a result, the Employer could not rely on the contract’s purported limitations to ESA minimums and was instead liable for common law reasonable notice. The court dismissed the Employer’s summary judgment motion and scheduled a further hearing to determine damages to be awarded to the Employee.

Charities and not-for-profits should review their employment contracts to eliminate language that could be interpreted as contradicting the ESA’s termination provisions. Given the potential liability for common law notice periods, organizations should consult employment counsel to ensure their contracts withstand judicial scrutiny. As this case illustrates, a single flawed provision can have significant financial consequences.

​Read the February 2025 Charity & NFP Law Update