by eruditelaw | Sep 30, 2025 | Blog Post, Employment Law, Uncategorized
On July 9, 2025, the Ontario Superior Court of Justice released its decision in Li v. Wayfair Canada ULC, 2025 ONSC 2959. The case addresses the enforceability of termination provisions in an employment contract and how they stand up against the Court of Appeal’s guidance in Dufault v. Township of Ignace.
Facts of the Case
Song Li was hired by Wayfair Canada ULC as a Senior Product Manager in January 2023. His compensation package was lucrative, including a salary of $221,564, benefits, RRSP contributions, and potential restricted stock units (RSUs). After just under nine months of service, Li was dismissed without cause in October 2023.
Upon termination, Li received one week of salary and benefits—exactly the minimum entitlements under Ontario’s Employment Standards Act, 2000 (the “ESA”). No letter of reference or outplacement services were provided.
Li brought an action for wrongful dismissal, seeking summary judgment. He argued that the termination clauses in his employment agreement were unenforceable, which would entitle him to common law reasonable notice.
The Plaintiff’s Arguments
Li challenged both the “for cause” and “without cause” provisions in the agreement:
- For Cause: The agreement allowed termination “at any time for Cause without notice… unless expressly required by the ESA.” Li argued this language unlawfully deprived employees of ESA protections, contrary to Dufault v. Township of Ignace.
- Without Cause: The clause restricted entitlements to “only the minimum statutory amounts” under the ESA. Li argued that this unlawfully narrowed his rights and therefore invalidated the entire termination provision.
Relying on Dufault, Li argued that because one aspect of a termination clause was non-compliant, the whole termination regime fell. He sought five months’ common law notice, which would also have captured a $73,017 USD RSU grant scheduled to vest in February 2024.
The Defendant’s Arguments
Wayfair countered that the contract was enforceable:
- The “for cause” language expressly incorporated the ESA definition of cause.
- The “without cause” language repeatedly tied entitlements to the ESA’s minimum requirements, making it ESA-compliant.
- Li had already received all that the ESA required.
The company also argued that Li failed to mitigate, noting he applied for only 28 jobs in five months, some at levels (such as Vice President) for which he was not qualified.
The Court’s Decision
Justice Dow upheld the enforceability of the termination provisions. Unlike in Dufault, the Wayfair contract expressly tied the definition of “cause” to the ESA and clearly provided ESA minimums for without-cause terminations. The Court distinguished Dufault on this basis, finding that the clause in that case omitted required entitlements and used broader language (“any time”) without tethering to the ESA.
Because the contract was valid, Li was limited to the ESA minimum of one week’s salary and benefits, which he had already received. His claim for common law notice was dismissed.
What If the Clause Had Been Invalid?
In obiter, the Court noted that if the termination clause were unenforceable, it would have awarded Li four months’ common law notice (not the five he claimed). This would have included entitlement to the February 2024 RSUs, as courts generally treat stock options and bonuses as part of compensation during the notice period (Paquette v. TeraGo Networks).
Key Takeaway
This decision reaffirms that Ontario courts will carefully parse termination provisions to ensure they comply with the ESA. Employers can take comfort that clauses explicitly referencing and incorporating ESA definitions—especially around “cause”—are more likely to be upheld.
At the same time, Li highlights that employees continue to test these clauses, often relying on Dufault. The difference lies in the drafting: if an agreement fails to track the ESA minimums precisely, it risks being struck down, with significant common law liability as the result.
Need More Information?
For more information or assistance related to employment contracts or ending the employment relationship, contact us at info@eruditelaw.com
The contents of this blog is not legal advice.
by eruditelaw | Mar 6, 2024 | Blog Post, Employment Law
Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029: Employers may not have “sole discretion” in terminating an employee without cause.
In recent years, employers have been dealt blow after blow as Ontario Courts continue to find ways to void termination provisions in employment contracts. Last month, the Ontario Superior Court of Justice continued this trend by finding that an employment contract was unenforceable because, among other reasons, it allowed the employer to terminate the employee’s employment in its “sole discretion” and “at any time”.
The employee, Karen Dufault, entered into a fixed-term employment contract of two years with the defendant employer, The Corporation of the Township of Ignance. The employer subsequently terminated her employment, without cause, two months into the employment relationship.
Ms. Dufault then brought an action against the Township for salary and benefits for the remaining term of the employment contract. She argued that the termination clauses in the employment contract violated the Employment Standards Act (“ESA”). Specifically, Ms. Dufault argued that:
- the “for cause” termination clause allowed for termination without notice in broader circumstances than permitted by the ESA;
- the “without cause” termination clause suggested that the employer could pay less payment in lieu of notice than would be required by the ESA; and
- the “without cause” termination clause opened the door to allow the employer to terminate employment in its “sole discretion” and “at any time”.
The Court accepted Ms. Dufault’s arguments and held that the employment contract was not enforceable because:
- the employment agreement would have allowed the employer to terminate the employment relationship “for cause” for reasons that did not meet the standards under the ESA for termination without notice;
- the employment agreement attempted to limit the payment in lieu of notice to “base salary”, which is less than the requirement amount pursuant to the
Finally, and perhaps most problematic of all for lawyers and employers is that the Court held that the termination “without cause” provision was invalid because it allowed the employer to terminate an employee in its “sole discretion” and “at any time”:
[46] Thirdly, the plaintiff submits that Article 4.02 misstates the ESA when it gives the employer “sole discretion” to terminate the employee’s employment at any time. I agree with this submission. The Act prohibits the employer from terminating an employee on the conclusion of an employee’s leave (s. 53) or in reprisal for attempting to exercise a right under the Act (s. 74). Thus, the right of the employer to dismiss is not absolute.
The Court reasoned that this would allow an employer to terminate an employee even if they were returning from protected leave or due to reprisal for the employee exercising their legal rights.
As a result, Ms. Dufault was entitled to her salary and benefits for the remainder of the fixed term employment contract.
Takeaways
While it remains to be seen whether this decision will be appealed, the growing body of case law voiding termination provisions are becoming increasing strict. Employers and their lawyers should be mindful of these new developments and review their employment agreements regularly to determine whether their contracts require revisions for both new and existing employees.
A copy of the decision is linked here: Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029
The contents of this blog is not legal advice. If you would like your employment contract reviewed, contact our team of lawyers at Erudite Law LLP for a consultation.
by eruditelaw | Mar 18, 2020 | Blog Post, Contracts
COVID – 19 (Coronavirus) and Force Majeure or Act of God Clauses
As Ontario declares a State of Emergency and begins shutting down many businesses in light of the continued spread of COVID-19 across Ontario, many companies and individuals are left asking whether or not they are required to honour their contractual commitments.
The question we are being asked again and again, is whether or not COVID-19 can be deemed a force majeure event, specifically, whether COVID-19 constitutes an “Act of God” sufficient to discharge a party’s contractual obligations. Here are the essential questions that need to be considered in order to determine if COVID-19 affects your contractual obligations:
Does your contract have a “Force Majeure” or “Act of God” clause?
A thorough review of your contract is necessary to determine whether there is a clause which can be interpreted as a “Force Majeure/Act of God Clause”. In the absence of an express contractual term stating that a party will not be required to honour their obligations in the event of a Force Majeure event or an Act of God, to date, Canadian courts have been unlikely to interpret the contract to have an implied Force Majeure Clause. This is not to say, that in the aftermath of COVID-19, we may see changes to this in common law. However, as the situation currently stands, if you do not have an express Force Majeure/Act of God Clause, you should not rely on COVID-19 as a reason for not honouring your contractual commitments.
Does your Force Majeure/Act of God Clause Cover COVID-19?
If your contract contains a Force Majeure/Act of God Clause, then it must be determined if the clause applies to the circumstances surrounding COVID-19. The Force Majeure/Act of God Clause will typically list the specific events which will be covered by the clause. If the clause does not specifically state “pandemic”, “disease” or something which can be applied to COVID-19, Canadian Judges may be required to rely on common law to determine if the clause covers COVID-19.
The Supreme Court of Canada, in Atlantic Paper Stock Ltd. v. St. Anne-Nack, [1976], was forced to do just that and held that the “common thread” in all the events listed in the clause was an event that is “unexpected, something beyond reasonable human foresight and skill” and applied the clause to an event which was not specifically named in Force Majeure/Act of God Clause as being covered as it fit this criterion.
Even if you intend to rely on a Force Majeure/Act of God Clause, it is important to note that you must always do your best to mitigate/reduce your damages, and take all reasonable steps you can to comply with your contractual obligations. If an event can be mitigated, courts may consider the event to be one that is not beyond the control of the party.
What if your contract does not have a Force Majeure Clause, or your Force Majeure clause does not apply?
In the event that you cannot rely on a Force Majeure/Act of God Clause to discharge your obligations under a contract, you may be able to rely on the Doctrine of Frustration. Frustration of contract takes place when an unforeseen event, at the fault of neither party, significantly changes the nature of the parties’ obligations or abilities to perform the contract.
For example, you enter into an agreement to rent a property and the property burns down, at the fault of neither party. The purpose of this contract, to rent the property, is frustrated by the lack of a property to rent. As such, the parties cannot reasonable be expected to comply with their contractual obligations.
The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has hindered, delayed or altogether prevented the performance of the contract.
Drafting Suggestions
The language used is key when drafting a Force Majeure clause in a contract. Parties who seek to broaden the scope of the clause, specifically regarding COVID-19 or other pandemics, should include phrases such as “communicable disease outbreak” rather than simply stating “epidemic” or “pandemic”.
On the other hand, parties may seek to limit the risk of COVID-19 triggering a Force Majeure event might consider implementing language that solely describes Force Majeure as an “act of God” with no additional events stated. With COVID-19’s long existence, people can better prepare, lowering the chances of an event being declared an “act of God” by the courts.
Further, the language of the contract should address the threshold of impact in clear language. Courts have found uncertainty occurs where a force majeure clause does not precisely define the impact required from the event. As an example, “preventing” performance may be too strict of a standard, whereas “hindering” performance can be considered too lenient.
Lastly, in order to ensure the party seeking to rely on the clause notifies the other party, a notice provision must be drafted. This provision outlines the time within which notice must be given, the facts the notice must contain, and where the notice should be served.
It is important to note that many Canadians are being affected by COVID-19, we can all do our part to work together to reduce the financial burden on individuals and businesses. Some contracts can be delayed or extended by mutual agreement, and parties may choose not to enforce certain contractual provisions immediately. We always strongly recommend seeking independent legal advice prior to taking any definitive actions with respect to your contracts.
To find out more about how to protect yourself or if you need assistance navigating your contracts, contact us by phone at 905-471-6161 or email us at info@eruditelaw.com.
Authors: Syrah Y. Yusuf, Alvin W. Leung, and Tiana Terrigno
