For years, Canadian courts have consistently sided with employees in employment disputes, meticulously dissecting contracts and often finding reasons to invalidate them. Even minor wording issues could unravel an employer’s carefully crafted agreements, and notice periods were frequently extended, regardless of the employee’s length of service.
However, a subtle shift is beginning to emerge. Over the past two years, a series of court decisions have offered employers a glimmer of hope, upholding termination provisions that previously might have been struck down. This recalibration suggests a potential return to a more balanced approach in employment law.
A recent case,Li v. Wayfair Canada, exemplifies this change. Song Li, a senior product manager, was terminated from Wayfair after just nine months of employment in 2023. At 45 years old, he earned a substantial salary of $221,564, along with benefits and a significant grant of restricted share units valued at $73,017.
Li’s employment contract stipulated that upon termination, he was entitled only to the minimum entitlements mandated by the Employment Standards Act (ESA). Given his short tenure, this amounted to a single week’s pay and benefits – the amount Wayfair provided.
Li challenged the validity of his employment agreement, initiating a wrongful dismissal claim in the Ontario Superior Court. He argued that the clause allowing Wayfair to terminate him “at any time and for any reason” violated the ESA, potentially permitting terminations during protected leaves like parental or medical leave.
This argument, gaining traction in recent decisions, posited that the mere *potential* for a clause to violate the ESA, even without actual misconduct, should render it unenforceable. The idea was that a theoretical breach should be treated as equivalent to a real one.
However, Justice Grant Dow diverged from this trend. He refused to accept that broad language like “at any time” automatically undermined ESA rights. Instead, he advocated for a pragmatic approach: examining the contract as a whole to understand its true intent.
The court determined that the clause explicitly committed Wayfair to fulfilling its ESA obligations upon termination. The agreement contained no attempt to circumvent statutory protections. This finding was crucial in upholding the contract’s validity.
This decision represents a welcome return to balance. It signals a willingness by the courts to respect the principle of freedom of contract, particularly when agreements demonstrably comply with existing employment legislation. Employers can now operate with greater confidence, knowing that clear, ESA-aligned contracts are less likely to be invalidated.
Predictability is essential for a thriving labour market. This case is a step towards restoring that predictability, fostering a more stable and equitable environment for both employers and employees.
