Because of today’s economy many employers hire employees on contract.  For example, most of the assistant Crown Attorneys in many areas in Ontario are hired on a year-by-year basis.  A lot of sales people and professionals are also hired on a “fixed term” meaning that their jobs will start today and end one year from today.  The contract then may or may not be renewed.  If your employer ends your contract without reason before the end of your fixed term then you may be entitled to damages.

However, reasonable notice of termination is normally inapplicable in fixed term contracts as the parties know when the contract is made and when that contract will end and any severance therefore will be assessed for the time period remaining on the term of the contract at the time it was breached.  However, things can easily get complicated in these types of cases.  Fixed terms contracts need to be very non-ambiguous given that employees can lose common law and statutory protection (this means one is normally entitled to termination pay under the Employment Standards Act and also damages for breach of contract under common law).

A common question is: what happens if an employee works for several years under a series of allegedly fixed contract terms?  One would assume that this is continuous service through many years which sometimes, coupled with oral agreements can signal an indefinite relationship which would then make the statutory protection and common law damages accessible by the employee.  For example in the case of Cabes v. London Health Sciences Centre, Judge Searle noted that quoting form the case of Ceccol v. Ontario Gymnasts Federation

“It seems to me that a court should be particularly vigilant when an employee works for several years under a series of allegedly fixed contract terms.  Employers should not be able to evade traditional protections of the ESA and common law by resorting to the label of a fixed term contract when the underlying reality of the employment relationship is something quite different, namely, continuous service by the employee for many years coupled with verbal representations and conduct on the part of the employer that clearly signal an indefinite relationship”.

The reality is that fixed term contracts of employment are legal and if they are not ambiguous they most likely will be enforced.  If they are enforced, then the protections under the ESA and common law principles of reasonable notice will not apply when that fixed term expires.  I.E. no severance for  you.

The courts require unequivocal and explicit language to establish such a fixed term contract and if contracts were in the least bit vague, they will be interpreted against the employer’s interest.

In the case of Ceccol noted above, Ceccol served the Federation loyally, professionally and continuously for almost 16 years.  The Federation did not say otherwise.  The Judge was not able to say that the contract that governed the relationship contained the unequivocal and explicit language necessary to establish a fixed term contract and as such the Judge found the employment contract was for an indefinite term, subject to renewal and termination in accordance with the other provisions of the contract.  In this case, a series of one year fixed term contracts were simply held to be ineffective and the Judge found that employment was indefinite because Ceccol was lead to believe that she was a long term employee.  The employer in this case was held to be required to point out to the employee’s attention provisions of the contract relating to termination of employment.

What happens if you work past your contract end date without a contract renewal?

Past cases have held that where a fixed term contract of employment ends and the employee continues to work after that ending, the employment can be presumed for an indefinite period.  In the case of Buckley v. Students Union of St. Thomas University, the Court found that if a fixed contract expires and the employee continues to be employed, the individual will be considered to be hired on an indefinite term contract.  Also in the case of Halter and Co. v. Goody, the employee kept working for only one day after the expiry of his term.  It was held that he had become employed for an indefinite term.

The long and the short is that fixed contracts actually come down to the contract itself.  The presumption of indefinite hiring can be made if the contract is deficient in any little way.  If there is ambiguity in the contract then it will be strictly interpreted against the employer’s interest.

Further, it is a big no-no to agree to a term of employment and then ask an employee to sign an employment agreement that provides a fixed term or provides for termination pay in the event of termination.  In Francis v. Canadian Imperial Bank of Commerce, the Court of Appeal noted that the Plaintiff agreed to employment and 4 weeks after he reported for work he was asked to sign an employment agreement that provided for 3 months pay in lieu of termination.  The Court of Appeal said that this was a unilateral attempt by an employer, after the deal had been made and in derogation of the employee’s common law rights to reasonable notice.

The long and the short is that Ontario legal authorities are clear that a term requiring reasonable notice should not be implied where an employment contract specifies the period of employment unless the contract is unconscionable.

If you need any assistance with employment contracts, fixed term contracts, termination of a fixed term employee or legal opinion with respect to the interpretation of fixed term contracts and the termination of an employment relationship, please do not hesitate to contact Matt Lalande at matt.lalande@haber-lawyer.com.

This is not legal advice but rather it is instead law interpretation of cases available to the public on www.canlii.com.