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Employment - ESA 'Wilfulness' Termination. Baker v. Van Dolder’s Home Team Inc.
In Baker v. Van Dolder’s Home Team Inc. (Ont CA, 2026) the Ontario Court of Appeal considered two consolidated wrongful dismissal appeals, these relating to the rule that specific contractual termination provisions that fail to be ESA-compliant are void - and that common law pay in lieu of notice principles are thus re-instated.
Here the court distinguishes the common law 'just cause' standard from that set out in the ESA ("wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer") [ESA Reg 288/01 - 'Termination and Severance of Employment', s.2(1)3]:[65] In order to appreciate the purpose and legal effect of this provision, it is necessary to briefly review the difference between “just cause” at common law (“Just Cause”) and the standard of “wilful misconduct” under the ESA (“Wilful Misconduct”).
[66] At common law, an employer is permitted to terminate an employment contract without notice or compensation where there is Just Cause for doing so. In this context, Just Cause is considered employee misconduct “that is incompatible with the fundamental terms of the employment relationship”: Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310, 78 C.C.E.L. (4th) 200, at paras. 61, 65, citing Dowling v. Ontario (Workplace Safety & Insurance Board) (2004), 2004 CanLII 43692 (ON CA), 246 D.L.R. (4th) 65 (Ont. C.A.), at paras. 49-50, leave to appeal refused, [2005] S.C.C.A. No. 25. In other words, when an employer has Just Cause to terminate the employee, it does not need to provide the employee with reasonable notice or payment in lieu under the common law.
[67] However, under the ESA, employees are entitled to notice (or pay instead of notice), benefits continuation, and severance pay when their employment has been terminated, except where they have been “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”. This is the combined effect of ss. 55 and 64(3) of the ESA and ss. 2(1)3 and 9(1)6 of the associated regulation, Termination and Severance of Employment, O. Reg. 288/01 (the “Regulation”).
[68] This court has held that a higher level of employee misconduct is required to fall within the Wilful Misconduct standard in the Regulation as compared with Just Cause at common law. In particular, Wilful Misconduct has been characterized as the employee doing something “deliberately, knowing they are doing something wrong” and as being “bad on purpose”: Render, at paras. 79-80, citing Plester v. Polyone Canada Inc., 2011 ONSC 6068, aff’d 2013 ONCA 47.
[69] Therefore, even if there is Just Cause at common law to terminate an employment contract without the need to provide reasonable notice, the employee will still be entitled to ESA notice (or pay instead of notice), benefit continuation, and severance pay, unless they have engaged in Wilful Misconduct as defined in the Regulation.
[70] This court has recently considered a number of with cause provisions which defined “cause” in terms broader than Wilful Misconduct: see Dufault (Ont. C.A.); De Castro v. Arista Homes Limited, 2025 ONCA 260, 95 C.C.E.L. (4th) 253; and Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451, 81 C.C.E.L. (4th) 1, leave to appeal requested but application for leave to discontinued, [2023] S.C.C.A. No. 83. The provisions in these cases were held to be inconsistent with the ESA and therefore unenforceable because they purported to deny the employee any notice or compensation (i.e., including ESA notice) merely for having engaged in misconduct that satisfied the common law standard of Just Cause or a separately defined contractual standard of “cause”, but fell short of the ESA standard of Wilful Misconduct.
[71] For example, the with cause provision in Dufault (Ont. C.A.) provided that if the employee’s employment was terminated with cause, “no further payments of any nature, including but not limited to, damages are payable to the employee…”. The provision defined “cause” as including “the failure of the employee to perform the services as hereinbefore specified without written approval of [the employer]”. The panel in Dufault (Ont. C.A.) therefore offered the following conclusion, at para. 22:The “for cause” termination clause purports to deny notice or pay instead of notice where the grounds for termination do not meet the high standard of wilful misconduct required under s. 2(1)3 of the Regulation. As such, the “for cause” termination clause in the employment contract fails to meet the minimum standard provided for in the ESA. [72] At the same time, the holding in Dufault (Ont. C.A.) is not inconsistent with the fact that an employer can terminate an employment contract for Just Cause not amounting to Wilful Misconduct, as long as it provides the employee with the minimum compensation required under the ESA. This must be the case in any event since, as discussed above, an employer can legally terminate an employee’s contract at its election, even in the absence of cause, provided that the employer satisfies the employee’s minimum entitlements under the ESA.
[73] As in Dufault (Ont. C.A.), the definition of “cause” in Mr. Baker’s contract is broader than the ESA standard of Wilful Misconduct. However, unlike the provision in Dufault (Ont. C.A.) and the termination provisions considered in other recent decisions of this court, the With Cause Provision in Mr. Baker’s contract provides that if Mr. Baker’s employment is terminated for “cause”, he will still be entitled to any “minimum compensation or entitlements prescribed by the Employment Standards Act”. The legal effect of this proviso is to bring the With Cause Provision into alignment with the ESA, since even if Mr. Baker’s employment is terminated for cause pursuant to his employment contract, he will still be entitled to notice, benefits continuation, and severance pay unless his conduct falls within the narrower category of Wilful Misconduct. In other words, the inconsistency between the employment contracts and the ESA in Dufault (Ont. C.A.), De Castro, and Rahman does not arise in the case of Mr. Baker’s contract. . Rahman v. Cannon Design Architecture Inc.
In Rahman v. Cannon Design Architecture Inc. (Ont CA, 2022) the Court of Appeal considered when an employment contract contravenes the ESA's termination provisions:[24] In my view, the motion judge erred in law when he allowed considerations of Ms. Rahman’s sophistication and access to independent legal advice, coupled with the parties’ subjective intention to not contravene the ESA, to override the plain language in the termination provisions in the Employment Contracts. By allowing subjective considerations to distort and override the wording of those provisions, the motion judge committed an extricable error of law reviewable on a correctness standard: Amberber v. IBM Canada Ltd., 2018 ONCA 571, 424 D.L.R. (4th) 169, at para. 65. It is the wording of a termination provision which determines whether it contravenes the ESA – even compliance with ESA obligations on termination does not have the effect of saving a termination provision that violates the ESA: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at paras. 43-44.
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[27] However, ESA notice and termination pay must be given for all terminations, even those for just cause, except for “prescribed employees”: ESA, s. 55. The disentitlement provision is found in the ESA regulation Termination and Severance of Employment, O. Reg. 288/01. Section 2(1) of the regulation provides:2. (1) The following employees are prescribed for the purposes of section 55 of the Act as employees who are not entitled to notice of termination or termination pay under Part XV of the Act:
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3. An employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. [28] The wilful misconduct standard requires evidence that the employee was “being bad on purpose”: Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310, at para. 79, citing Plester v. Polyone Canada Inc., 2011 ONSC 6068, 2012 C.L.L.C. 210-022, aff’d 2013 ONCA 47, 2013 C.L.L.C. 210-015. For example, in Oosterbosch v. FAG Aerospace Inc., 2011 ONSC 1538, 2011 C.L.L.C. 210-019, the court awarded damages for ESA notice and severance after holding that the employer had just cause to terminate the employee for persistent carelessness that did not meet the wilful misconduct standard.
[29] There is nothing in the Operative Just Cause Provision that limits its scope to just cause terminations for wilful misconduct. On its plain wording, the Operative Just Cause Provision gives CannonDesign the right to terminate Ms. Rahman’s employment without notice or payment, for conduct that constitutes just cause alone. That means the Operative Just Clause Provision contravenes the ESA and s. 5 renders it void. Section 5 provides that no employer shall contract out of an employment standard and any such contracting out is void.
[30] This court has repeatedly held that if a termination provision in an employment contract violates the ESA – such as a “no notice if just cause” provision – all the termination provisions in the contract are invalid. See, for example, Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, at para. 10, leave to appeal refused, [2020] S.C.C.A. No. 292; Rossman v. Canadian Solar Inc., 2019 ONCA 992, 444 D.L.R. (4th) 131, at para. 18. In Waksdale, as in the present appeal, the employer had not purported to terminate the employee for just cause. However, the just cause provision in the employment contract violated the ESA. The invalidity of the just cause provision rendered the other termination provisions unenforceable: Waksdale, at para. 10.
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