Employment contracts are often treated as documents that are drafted, signed, and filed away…

Employment contracts are often treated as documents that are drafted, signed, and filed away. But recent decisions from the Ontario Court of Appeal highlight why that approach may no longer be enough.

Two 2026 decisions—Baker v. Van Dolder’s Home Team Inc.; Li v. Wayfair Canada ULC and Wigdor v. Facebook Canada Ltd.—provide important guidance for employers and HR professionals. Together, they address two areas that can create significant risk for organizations: termination provisions and compensation arrangements.

The broader message for employers is practical: employment agreements, compensation plans, HR policies, and workplace practices need to work together as a consistent system.

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Why These Decisions Matter to Employers

Employment agreements do more than establish an employee’s role, salary, and responsibilities. They can also determine what happens when the employment relationship ends.

Termination clauses, bonuses, commissions, benefits, stock options, restricted stock units, and other forms of incentive compensation can all become important when an employee leaves the organization.

The recent Ontario Court of Appeal decisions demonstrate that seemingly small details in employment documents can have significant consequences.

At the same time, the decisions suggest that employers should look beyond individual words or clauses and consider whether their employment documentation works coherently as a whole.

For HR leaders, this creates an opportunity to take a more proactive approach to contract management and employment compliance.

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1. Termination Clauses: Context Matters

One of the key issues addressed in Baker/Wayfair was whether phrases such as “at any time” and “for any reason” automatically made termination provisions unenforceable under Ontario’s Employment Standards Act, 2000 (ESA).

The Court of Appeal rejected the idea that these phrases, by themselves, automatically invalidate a termination provision.

The Court’s reasoning emphasized that employment agreements should be interpreted objectively and as a whole rather than by isolating individual words and interpreting them in the most problematic way possible.

For employers, this provides some additional clarity.

However, it should not be interpreted as a blanket approval of every termination clause.

An employment agreement still needs to preserve an employee’s minimum entitlements under applicable employment standards legislation. The interaction between different provisions within the agreement remains important.

What does this mean for HR?

Rather than asking:

“Does our contract contain the right wording?”

HR teams should be asking:

“Does our employment agreement work properly as a whole?”

That distinction matters.

A contract can contain carefully drafted language while still creating problems if different sections contradict one another or if the agreement does not properly account for statutory minimum entitlements.

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2. Compensation Doesn’t End When Employment Ends

The second decision, Wigdor v. Facebook Canada Ltd., highlights another important area of risk: incentive compensation.

In that case, the Ontario Court of Appeal increased damages awarded to a former employee by approximately US$4.7 million in relation to restricted stock units (RSUs) that would have vested during the employee’s 10-month common-law notice period.

The Court considered the RSUs a term or condition of employment because the entitlement had been incorporated into the employment agreement.

The decision also addressed the relationship between the RSU documentation and Ontario’s employment standards legislation, including the statutory notice period.

This is an important reminder for organizations that use variable or incentive compensation.

Bonuses and commissions aren’t the only consideration.

Depending on the organization’s compensation structure, employers may also need to consider:

• Bonuses
• Commissions
• Restricted stock units (RSUs)
• Performance share units (PSUs)
• Stock options
• Share purchase arrangements
• Other incentive programs

The treatment of these forms of compensation at termination can depend on the specific structure of the plan and the language contained within the relevant documents.

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3. Employment Documents Shouldn’t Operate in Isolation

One of the most practical lessons from these decisions is that HR documentation should not be viewed as a collection of completely separate documents.

An organization may have:

• An employment agreement
• An offer letter
• A bonus plan
• A commission structure
• An equity or incentive plan
• Workplace policies
• Benefits documentation
• Manager communications
• Payroll and HR procedures

Each document may appear reasonable on its own.

The greater risk can arise when those documents don’t align.

For example, what does an employee’s employment agreement say about compensation upon termination?

What does the bonus plan say?

What does the equity plan say?

How is the organization actually administering the program?

Do the documents and the organization’s practices tell the same story?

The HRPA source describes this as a shift away from asking whether an employer can simply draft around a particular issue and toward asking whether employment documents operate coherently as a system.

That is an important HR governance principle.

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4. What Should Employers Review?

These decisions provide a useful reason for Ontario employers to take another look at their employment documentation.

Employment agreements

Review current templates to determine whether termination provisions are consistent throughout the agreement and preserve applicable ESA minimums.

Avoid relying solely on a checklist of particular words or phrases. The agreement should be considered as a complete document.

Compensation plans

Review how bonuses, commissions, incentives, and other compensation programs interact with employment agreements.

If a compensation program is incorporated into an employment agreement, employers should understand how that may affect the employee’s entitlements.

Equity and incentive arrangements

Organizations that provide RSUs, PSUs, stock options, or other equity-based compensation should pay particular attention to the relationship between the plan documents and employment agreements.

The Wigdor decision demonstrates that the treatment of these arrangements at termination can have significant financial implications.

Offer letters and onboarding documents

Employment documentation should be consistent from the moment an employee receives an offer.

A discrepancy between an offer letter and the employment agreement can create unnecessary uncertainty later.

HR policies and operational practices

A well-written employment agreement is only one part of the picture.

HR processes, manager communications, compensation administration, and termination practices should also align with the organization’s documentation.

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5. Don’t Treat Employment Contracts as “Set and Forget”

Employment law continues to develop.

That means a contract template that was appropriate several years ago may not necessarily reflect the organization’s current practices or the current legal environment.

The source material recommends considering periodic reviews, particularly following significant court decisions or legislative changes, as well as organizational events such as compensation redesign, acquisitions, or restructuring.

For HR teams, this can become part of a broader governance process.

Instead of reviewing contracts only when hiring or terminating an employee, organizations can establish a recurring review process.

Consider reviewing:

Employment agreements
Are the current templates still aligned with organizational practices?

Compensation plans
Do bonus, commission, and incentive arrangements align with employment agreements?

Termination provisions
Are the organization’s intended entitlements clearly and consistently documented?

Benefits and incentive programs
What happens to these entitlements when employment ends?

HR processes
Are managers and HR teams implementing the written agreements consistently?

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6. Questions HR Leaders Should Be Asking

A proactive HR review can begin with a few practical questions:

1. Are our employment agreements consistent?

Do the different sections of the agreement work together and clearly establish the organization’s intended employment terms?

2. Are compensation programs properly connected to employment agreements?

If employees receive bonuses, commissions, equity, or other incentives, are the relevant documents aligned?

3. What happens to compensation when employment ends?

Have the organization and its HR team clearly considered how termination affects variable compensation, benefits, and incentive programs?

4. When were our employment templates last reviewed?

If the answer is “several years ago,” it may be time to take another look.

5. Do our practices match our documents?

A contract may look appropriate on paper, but HR procedures and management practices should also be consistent with the written terms.

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7. HR Has an Important Role in Managing Employment Risk

Employment law is not solely a legal-department issue.

HR professionals are often responsible for maintaining employment templates, communicating employment terms, administering compensation programs, supporting managers, managing employee transitions, and implementing workplace policies.

That puts HR in an important position to identify inconsistencies before they become larger problems.

The recent Court of Appeal decisions reinforce the value of having HR and legal functions work together when reviewing employment agreements and compensation programs.

For organizations with complex compensation arrangements or significant employment-law exposure, employment counsel can provide legal advice specific to the organization’s circumstances.

HR, meanwhile, can help ensure that those legal requirements are translated into practical policies, processes, documentation, and day-to-day workplace practices.

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A Proactive Approach Can Help Protect Your Organization

The takeaway from Baker/Wayfair and Wigdor isn’t simply about changing a few words in an employment contract.

It’s about taking a broader view.

Employment agreements, compensation programs, HR policies, and workplace practices should be reviewed as connected parts of the employee lifecycle.

For employers, that means moving away from a “set it and forget it” approach and toward regular review, better documentation, and stronger alignment between what the organization promises and how it operates.

Recent court decisions are a useful reminder that employment documentation deserves ongoing attention—not only when a new employee joins or an employment relationship ends.

At MERE HR & Consulting, we help organizations build practical HR processes that support compliance, consistency, and effective workforce management.

Need help reviewing your HR practices, employment documentation, or workplace policies?

MERE HR & Consulting can help your organization identify areas that may need attention and develop practical HR solutions aligned with your business needs.