In this blog, we will explore some common issues that a fix-term contract employee may have in their employment relationship.
Fixed Term vs. Indefinite Term
Whether a contract of employment is of a fixed or indefinite duration will often be a significant finding.
For the indefinite term contracts, the employment relationship is one of continuous service, which is intended to last for an indefinite duration. Once terminated, these employees are entitled to statutory or common law reasonable notice.
If a contract is for a fixed-term, the employee will be in a position to sue for damages on the basis of being prevented from working the entire term should the employer terminate employment before the expiry of the term.
The concept of reasonable notice of termination employment is inapplicable in these circumstances as the parties know at the contract’s formation when the contract of employment is to terminate, and damages will be assessed for the period remaining on the term of the contract at the time of the breach.
The Establishment of a Fixed Term Contract
Given that an employee could lose common law and statutory protections due to a finding of a fixed term contract, the court will require unequivocal and explicit language to establish such an agreement. Ambiguities will be strictly interpreted against the employer’s interest.
The court will be particularly vigilant when an employee works for several years under a series of allegedly fixed term contracts when the reality of the employment relationship is 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 term relationship.
In the case of Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801, three teachers employed under continuous one-year fixed term contracts were ruled to be indefinite-term employees. The Court found that the early termination and renewal provisions in the employment contract were ambiguous as to the duration of the term. The employer also made representations to the teachers that their contracts would be renewed on an annual basis. Moreover, the Court also found that the contracts of these three teachers were renewed for several years, which is another indicator of the indefinite-term employment.
Damages and Mitigation in the Fixed Term Contracts
In wrongful dismissal cases, the general rule is that the employee’s action is for damages and there is an obligation to mitigate damages. However, in the case of fixed term contracts, the Court ruled that employees are not subject to the same requirement, even where the contract is silent on the duty to mitigate.
Subject to an enforceable early termination provision, a fixed employment contract obligates the employer to pay the employee to the end of term and the duty to do so will not be subject to a mitigation obligation.
Early Termination Clauses
In order for an early termination provision enforceable, it must be clear and unambiguous.
- It should limit the fixed term employee’s entitlement to less than the unexpired portion of the fixed-term and comply with the minimum entitlement stipulated in the Employment Standards Act, 2000.
- Employers could also insert a clause in the contract, which expressly states that the fixed-term employee will have a duty to mitigate in the event of early termination.