In a recent decision, Henshell v. BFN of Ojibways, 2026 ONSC 5768 ("Henshell"), the Ontario Superior Court of Justice provided an early and encouraging application of the interpretive principles to be applied to termination provisions established by the Ontario Court of Appeal in Baker v. Van Dolder's Home Team Inc., 2026 ONCA 568 ("Baker") – this time in the context of a federally regulated employer and the Canada Labour Code ("CLC").
The Court upheld the enforceability of a termination clause that limited the employee's entitlements on termination to the minimums prescribed by the CLC, rejecting the employee's argument that language in a separate confidentiality provision referencing termination "for cause" rendered the clause unenforceable. In doing so, the Court described the Baker framework as a "welcomed departure” from the overly technical approach which has become the norm in Ontario and had been rebuked by the Court of Appeal.
What happened?
The plaintiff, a practicing lawyer with 20 years of experience, was hired as Chief Executive Officer by Batchewana First Nation of Ojibways ("BFN"), a federally regulated employer. She signed a written employment agreement and commenced employment in May 2024. Approximately two and a half months later, BFN terminated her employment without cause. The plaintiff brought a claim to the Ontario Superior Court of Justice alleging that the termination clause in her employment agreement was unenforceable and that she was entitled to common law reasonable notice of termination, which she claimed at $350,000 (representing 24 months’ pay), as well as $500,000 in moral and punitive damages.
BFN brought a motion under Rule 21.01 of the Rules of Civil Procedure, asking the Court to determine, as a question of law, whether the termination clause was enforceable, and to strike the claim as disclosing no reasonable cause of action.
The termination clause in the employment agreement provided that BFN could terminate the employee's employment "for any lawful reason" upon providing the employee with such notice or pay in lieu of notice as required by the CLC, along with all other entitlements under the CLC, including severance pay. The clause further stated that the employee would not be entitled to any further notice or pay in lieu of notice under the common law.
The employee's challenge did not target the termination clause itself. Instead, the employee focused on a separate provision in the agreement dealing with confidentiality. The provision under review stated that:
"any breach of the confidentiality of information policies or procedures which are in effect from time to time will be cause for severe discipline and/or termination of employment for cause."
The employee argued that this language purported to permit termination without statutory entitlements under the CLC for any breach of confidentiality, regardless of severity, rendering the termination provision as a whole unenforceable.
What did the Court decide?
The Court applied the interpretive framework from Baker and rejected the employee's argument.
The Court held that while the employee's interpretation of the impugned confidentiality language might be plausible if the words were read “literally and in isolation," it was not correct to end the analysis there. Consistent with Baker, the agreement had to be read as a whole to determine what the parties objectively intended based on the text and surrounding circumstances.
Reading the confidentiality and termination provisions together, the Court concluded that the parties objectively intended that any termination, including a termination for cause arising from a breach of confidentiality, would be for a lawful reason and that the employee would receive all entitlements required by the CLC. In reaching this conclusion, the Court considered the surrounding circumstances, noting that BFN could not reasonably have intended the language to conflict with the clear wording of the termination provision.
The Court also noted the significance of the word "or" in the impugned language, i.e. "severe discipline and/or termination of employment for cause". The inclusion of “or” gave rise to an interpretation that not all breaches of confidentiality would result in termination for cause, allowing for a consideration of both context and circumstances. The termination provision was therefore valid and enforceable, and the employee was not entitled to common law reasonable notice.
The Court also distinguished two prior decisions relied upon by the employee. In Ghazvini[1], the court had invalidated termination provisions under the CLC because the employer’s contractual definition of cause was broader than the strict "just cause" standard required under the CLC. In Henderson[2], the court had invalidated a termination provision under Ontario’s Employment Standards Act, 2000 where the contract stated that a failure to comply with confidentiality and conflict of interest provisions would result in termination without notice. The Court in Henshell found that the language before it was "far less broad" and noted that neither decision had considered the interpretive framework subsequently established in Baker. Since Henshell was released, however, the Ontario Court of Appeal has upheld the result in Ghazvini, expressly distinguishing Baker.
A Subsequent Appellate Decision: Ghazvini
Subsequent to the release of Henshell, on October 29, 2026, the Ontario Court of Appeal released its decision on the appeal of Ghazvini[3], dismissing the employer’s appeal of the lower court’s decision.
Importantly, the Court of Appeal distinguished Baker rather than rejecting its approach. In Baker, the otherwise overly inclusive for-cause provision preserved minimum statutory compensation or entitlements. The for-cause provision in Ghazvini contained no such language. The Court of Appeal also upheld the conclusion that a separate “Compliance with Legislation” provision did not cure the statutory breach. Because the for-cause provision was unenforceable, the Court did not need to decide whether the without-cause provision was independently enforceable.
How do Henshell and Ghazvini fit together?
The decisions illustrate the importance of both contextual interpretation and the actual language used. In Henshell, the Court read the confidentiality language together with a termination provision that required a lawful reason and payment of all CLC entitlements. In Ghazvini, the for-cause provision expressly denied entitlements for conduct that did not necessarily meet the applicable just cause standard. A general compliance provision did not overcome that defect.
The appeal of Ghazvini should not be read as abandoning Baker’s interpretive framework, nor as establishing a CLC cause standard distinct from common law just cause.
Takeaways
Read together, these two decisions begin to offer a more complete picture of the interpretation of termination provisions in the federal context. For employers and counsel, the practical lessons include:
- The Baker framework has application beyond Ontario and into the federal context. In addition, Ghazvini expressly confirms that Waksdale’s approach also applies to CLC-governed agreements.
- Language outside the principal termination clause can affect enforceability, even where the employee is dismissed without cause.
- Prior decisions that invalidated termination clauses on a more technical basis may carry less weight going forward.
- Ensure that any contractual definition of cause does not remove statutory entitlements in circumstances where they remain payable.
