Some workers work under a fixed-term contract. While most contracts of employment are for indefinite term lengths, fixed-term contracts specify how long a worker will be employed by a particular employer. There are certain benefits for working under a fixed-term contract, specifically if such contracts do not specify that the worker can be terminated with or without cause. Without a provision within the contract detailing that workers can be terminated with or without cause, a fixed-term worker cannot be terminated for either reason. Nevertheless, sometimes termination occurs in breach of the fixed-term contract. In those scenarios, it is important for workers to know what protections they are entitled to.
Termination of a Fixed-term Contract
Without a termination clause within a fixed-term contract, termination of a worker under such a contract would be breach of the contract. Typically, when workers are terminated without cause, they can pursue their rights for common law reasonable notice. However, in Howard v. Benson Group, the Ontario Court of Appeal held the common law notice period does not apply for fixed-term contracts. A fixed-term contract specifies precisely when the employment is expected to end, so employers need not provide reasonable notice for termination. Nevertheless, Ontario’s Court of Appeal also held that workers terminated because their fixed-term contract was breached are entitled to payment until the end of the term of the contract. In other words, employers cannot get out of paying the worker merely by breaching the contract or terminating the worker before the contract’s end date. Instead, workers must be paid until the stipulated end date of the contract. Workers are entitled to payment for the remainder of the contract, following the parties’ reasonable expectations of the contract under Honda v Keays. Specifically, this would entail all the payments and benefits expected to be received under the contract, including things like salary, pension, vacation pay, incentive plans, etc., as expressed in Tarras v. The Municipal Infrastructure Group Ltd.
The only circumstance where workers are not entitled to be paid until the end of the contract is if there is a clear and unequivocal provision which specifically allows for early termination. Such a provision must not attempt to contract out of Ontario’s Employment Standards Act, and if it ultimately does so, it will be found to be unenforceable following the Supreme Court’s ruling in Machtinger v. HOJ Industries Ltd. Termination of a worker pursuant to an unenforceable termination provision also results in the worker being entitled to payment until the end of the contract’s term.
Reasonable Notice
As mentioned above, workers under a fixed-term contract are not entitled to the common law reasonable notice period. However, there are circumstances where a worker may oust this presumption. A fixed-term contract must contain clear and unequivocal language that establishes it as a fixed-term contract. Absent such language, the contract will be held to be an indefinite term contract. Sometimes, workers work under numerous successive fixed-term contracts, building up a rapport with the employer over time. As established in Ceccol v. Ontario Gymnastic Federation, when the underlying reality of the employment relationship resembles the traditional indefinite term contract of employment, then the court should treat the relationship accordingly. Namely, when the worker performs continuous service for many years with the employer, alongside verbal representations and employer conduct that signal an indefinite employment relationship, the court will acknowledge such an employment situation as an indefinite length employment relationship. This is done over and above any existing fixed-term employment contracts, like the 17 consecutive 1-year length contracts found in Ceccol.
In circumstances where evidence supports the establishment of an indefinite employment relationship over and beyond any fixed-term contracts, the court has held that a terminated worker is thus entitled to common law reasonable notice for dismissal without cause. This is especially important for workers who have been terminated after many successive fixed-term contracts, as the length of service and experience, both factors to be considered when calculating the length of reasonable notice period, can be carried across each successive contract. The following factors for calculating the length of reasonable notice outlined in Bardal v. Globe & Mail Ltd., which include:
- length of service,
- character of employment,
- age of employee,
- availability of similar employment.
However, Bardal factors are not a closed list, and more can be and have been added since Bardal was decided. If you have been working consecutive successive fixed-term contracts, and have recently been terminated from your employment, you may very well be entitled to reasonable notice or pay-in-lieu thereof.