As we often see in litigation, doubling down on a losing hand doesn’t just waste time, it can cost a lot of money. In the recent Ontario Court of Appeal decision in Adelman v. IBM Canada Limited (“Adelman”)1, the employee successfully sued for wrongful dismissal, securing $682,151.18 in damages.

This significant award represented a 24-month notice period that included:

  • compensation for bonuses,
  • restricted stock units, and
  • stock options.

While the damages alone underscore the need for strong employment contracts and put employers on notice, Adelman also highlights the need for both employers and employees to be strategic in litigation and adopt reasonably defensible positions. This warning came from the Court’s ruling on legal costs.

The court ordered the employer to pay a staggering $215,000.00 in legal costs on a substantial indemnity basis. Substantial indemnity costs are punitive and elevated costs awards, typically awarded when a court wishes to express severe disapproval of a party’s litigation conduct.

In Adelman, the court ordered these costs against the employer because it stubbornly relied on a legal position that was in direct contradiction with recent case law that the employer was obviously aware of, as it was the defendant and appellant in that decision as well. Specifically, in Milwid v. IBM2, the Court had already ruled against the employer regarding the exact same equity entitlement language at issue. Despite being fully aware of this ruling, the employer maintained an indefensible stance that the employee had no equity entitlements, abandoning its position only weeks before trial. The court characterized this conduct as having an “aura of lawlessness” and noted that it was an unreasonable pressure tactic against the employee.

Saving Schrödinger’s Termination Clause

Adelman illustrates why both employers and employees must beware the risks of insisting on a legal position that is no longer supported by the law. This lesson is timely, as the Ontario employment law landscape is currently bracing for the highly anticipated appeal decisions in Baker and Li3. These appeals center on whether termination clauses containing the phrases “at any time” or “for any reason” are enforceable, or if they are unenforceable because they breach the Employment Standards Act, 2000 (the “ESA”)4. Similarly, a key issue is whether a saving provision, such as “subject to the requirements of the ESA”, can save a termination clause.

For context, it was argued during the appeal that there are 47 separate provisions in Ontario statutes that protect an employee from being fired, even if their ESA entitlements are provided, so clauses providing that an employee will be provided with their ESA entitlements may not be enforceable even without other common defects, such as not providing for continuation of benefits, all the employee’s compensation, or conflating just cause with the ESA standard of wilful misconduct.

On the subject of just cause versus wilful misconduct, the Court noted that it would be very difficult for an employee to understand the difference between the two, and their entitlements upon dismissal, even if the correct standard is referenced. The Court also noted that what’s important may ultimately be whether the contract can be interpreted to comply with the ESA, rather than the employer’s intention. Given the complexities of the ESA, even clauses referencing it properly may not be easily understood by employees. Therefore, saving provisions confirming compliance may not be totally offside. The upshot is that the employment bar does not know what the Court will determine.

Currently, the law is that a saving provision will not save a bad, non-compliant clause, but this pending decision may change that entirely. As a result, many employment contracts currently feature what is essentially a Schrödinger’s termination clause, as the present legal situation mirrors the famous thought experiment which posits that matter can exist in overlapping states until observed – a termination clause may be enforceable and unenforceable until the Court issues its decision. This situation creates uncertainty for employers and employees in wrongful dismissal matters where the termination clause has “just cause” language, for example, but has a saving provision with clear wording that the ESA will be complied with. 

Employers and employees seeking legal advice today may have a seemingly strong position, but there is a risk that the foundation will shift once the Court issues its decision. When that ruling is released, it will definitively confirm whether many of these Schrödinger’s termination clauses are enforceable or not worth the paper they are printed on, as Stuart likes to say.

Employers and employees engaged in severance negotiations will need to adjust their positions based on the outcome. Even more critically, employers and employees actively involved in litigation may have to pivot or they risk suffering the cost consequences for taking on ill-advised and entrenched legal positions, as seen in Adelman.

If you think you need an employment lawyer…

The legal landscape may be shifting, but you do not have to navigate it on your own.

If you are an employer, we are ready to advise you on the current enforceability of your termination clauses and assist you with preparing your litigation strategy.

If you are an employee, we can review your employment agreement to help you understand your entitlements, determine whether your employer is relying on an unenforceable contract, and assist with severance negotiations and litigation.

For both sides of the table, we are keeping close tabs on the upcoming ONCA decision and are prepared to provide immediate, strategic advice on how this impending decision impacts your termination clauses.

 Footnotes

  1. Adelman v. IBM Canada Limited, 2026 ONSC 2714 (CanLII), <https://canlii.ca/t/kkzjj>, retrieved on 2026-06-17
  2. Milwid v. IBM Canada Ltd., 2023 ONSC 490 (CanLII), <https://canlii.ca/t/jv9bq>, retrieved on 2026-06-17
  3. Geoffrey Lowe, “The Township, the Baker and the Furniture Maker,” Canadian HR Reporter, April 9, 2026, https://www.hrreporter.com/opinion/canadian-hr-law/the-township-the-baker-and-the-furniture-maker/394285.
  4. Ontario, Employment Standards Act, 2000, SO 2000, c 41, current consolidation (January 1, 2026), https://www.ontario.ca/laws/statute/00e41.

 

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