A Fork in the Road: Li v. Wayfair Canada ULC., Unsettles the Law on Without Cause Termination Clauses

The Ontario Superior Court’s recent decision in Li v. Wayfair raises new uncertainty for employers relying on without cause termination clauses. For employees, the ruling blurs the line between enforceable and unenforceable contracts. On July 9, 2025, the Ontario Superior Court of Justice released its decision on Mr. Song Li’s wrongful termination dispute. Mr. Li sought summary judgement on the enforceability of his employment contract with Wayfair. Specifically, Mr. Li argued for a reasonable notice period beyond one week of severance because the termination clauses in the employment contract were unenforceable. Wayfair had terminated Li’s employment without cause. In response, Mr. Li challenged the validity of both the without cause and with cause clauses. In coming to its decision, the court in Li v. Wayfair revisited the unique legal landscape that employment contracts are embedded in. While the Court’s reasoning on the with cause termination clause is consistent with precedent, its holding on the without cause clause deviates from previous cases.

Waksdale and Wrongful Termination Claims

By way of context, a plaintiff to a wrongful termination dispute will often challenge the enforceability of both the without cause and with cause termination clauses. Part of the reason for this litigation strategy stems from the Ontario Court of Appeal’s holding in Waksdale v. Swegon North America Inc. In Waksdale, the Court of Appeal set out the following rule of analysis for termination clauses:

“The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA […] While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.”[1]

The Court’s reasoning hinged on the power imbalance that exists between employees and employers at the time of contract negotiations. In essence, If any part of a termination clause violates the Employment Standards Act (“ESA”) (Ontario), the entire clause is invalid, and the employee is entitled to common law “reasonable notice” beyond the ESA minimums.[2] It is immaterial whether the clause was relied on or not since an employer nonetheless enjoys the employee’s compliance with the illegal terms during their employment.[3] Furthermore, the Waksdale Court held that termination clauses which were noncompliant with the ESA could not be saved by a severability clause.[4]

The reasoning in Waksdale is often used to undermine the enforceability of an employer’s exercise of a purportedly “valid” without cause clause. In many cases, employment contracts’ improper use of common law definitions of “ just cause” in with cause clauses is too inclusive. The ESA mandates that employees can only be terminated for cause due to willful misconduct, or “being bad on purpose.”[5] Conduct justifying termination must be intentional, not merely negligent. Employee plaintiffs have previously defeated employers’ exercise of without cause termination clauses by highlighting the illegality of common law “just cause” terms in the same contract.[6]

Although illegal with cause clauses often invalidate termination provisions, Dufault v. The Corporation of the Township of Ignace introduced an additional complication in how without cause clauses are interpreted. Traditionally, an employee could be legally terminated at any time with notice, provided the without cause clause met the ESA’s s. 57 minimum time notice requirements and continued (or paid) all benefits and contributions during the notice period as per ss. 60 and 61. In some employment contracts, employers often inserted an “at any time and for any reason” term in their without cause clauses. However, Dufault challenged this practice by ruling that “the [Employment Standards] 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).”[7] Employers cannot exercise an unchecked right to dismiss their employees under without-notice clauses.

Mr. Li’s Unsuccessful Use of the Waksdale and Dufault Rules

Despite the strict statutory limits on employment contracts, Mr. Li’s challenge to the just-cause and without cause termination clauses was unsuccessful. The court disposed of the with cause challenge easily: “cause” in Mr. Li’s contract was explicitly defined as willful misconduct on the second page.[8] However, the court’s reason for rejecting Mr. Li’s application of Dufault to the “for any reason” term in the without cause clause was opaque. Plaintiff’s counsel argued that the employer’s right to terminate Mr. Li “at any time and for any reason with notice” violated the ESA’s protections against termination for taking parental leave, asserting ESA rights, or complying with the Occupational Health and Safety Act.[9] Notably, this was the same argument that was made by plaintiff’s counsel in Dufault. The court rejected this reasoning without providing persuasive justification.

Li’s Case Exhibits a Fork in the Road

While courts have consistently invalidated illegal “just cause” clauses, the validity of “any reason” language in without cause clauses unsettled.  Mr. Li’s case is set within this unsettled arena of post-Dufault without cause termination clauses. So far, only four published cases have directly addressed the Dufault court’s reasoning on “any reason” language in without cause clauses. Both Baker v. Van Dolder’s Home Team Inc., and Chan v. NYX Capital Corp., have upheld the reasoning that an employer cannot include an “any reason” term in a without cause clause.[10] Jones v. Strides Toronto further held that the presence of “any time” is not sufficient to invalidate a without cause clause. Jones noted that the presence of “sole discretion” or “at any time” language are necessary elements to trigger the reasoning in Dufault.[11]

On the other hand, Li v. Wayfair seemingly attempts to marginalize the Dufault court’s reasoning to obiter. The Li court held that the without cause clause in Dufault was invalid because the “wording failed to provide for all types of wages such as vacation pay or sick days.”[12] Consequently, the court in Li distinguished Dufault by focusing on the technical ESA defect in Dufault’s clause (its failure to provide for all types of wages such as vacation pay), whereas Li’s contract explicitly covered benefits and contributions.[13] This holding explicitly ignores the Dufault court’s statement that “the right of the employer to dismiss [without cause] is not absolute.”[14] No further reasoning for this departure from precedent exists beyond  “I find the wording in this employment contract to be distinguishable,” is provided.[15] In essence, the court glossed over the Dufault court’s rejection of sole discretion language in without cause clauses.

It is currently uncertain whether employers can use sole discretion terminology in without cause termination clauses. To a certain extent, Li overlooks the “any time” term within the employment contract’s without cause clause. This gap in reasoning may indicate that future courts will revert to the holdings in Dufault, Baker, and Chan, which concluded that including “any time” in a without cause clause can poison the termination provision. Ultimately, Li v. Wayfair leaves Ontario courts at a fork in the road: will they continue Dufault’s stricter scrutiny, or follow Li’s more permissive approach? Until an appellate court resolves this, both employees and employers face uncertainty.

 -AK

[1]Waksdale v. Swegon North America Inc., 2020 ONCA 391 at para 10.

[2] Ibid at para 10.

[3] Ibid at para 12.

[4] Ibid at paras 13-14.

[5] Summers v. Oz Optics Limited, 2022 ONSC 622 at para 7.

[6] Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 at para 29; De Castro v. Arista Homes Limited, 2024 ONSC 1035 at para 10, affirmed in De Castro v. Arista Homes Limited, 2025 ONCA 260 at paras 11-12; Tan v Stostac Inc., 2023 ONSC 2121 at paras 10-12; Ojo v Crystal Claire Cosmetics Inc., 2021 ONSC 1428 at paras 11-18.

[7] Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029 at para 46 [Dufault]. The case was appealed, but this part of the holding was not overturned in Dufault v. Ignace (Township), 2024 ONCA 915. Leave to appeal dismissed in Corporation of the Township of Ignace v. Karen Dufault, 2025 CanLII 51603 (SCC).

[8] Li v. Wayfair Canada ULC., 2025 ONSC 2959 at para 10 [Li].

[9] Ibid at para 13.

[10] Baker v. Van Dolder’s Home Team Inc., 2025 ONSC 952 at paras 9 and 10; Chan v. NYX Capital Corp., 2025 ONSC 4561 at paras 10 and 11.

[11] Jones v. Strides Toronto, 2025 ONSC 2482 at paras 21-23.

[12] Li, supra note 8 at para 19.

[13] Ibid at 19.

[14] Dufault, supra note 7 at para 46.

[15] Li, supra note 8 at para 20.