Fixed-Term Contracts

If you have a fixed-term contract, what are you entitled to when you are terminated before the end of the contract?

March 22, 2019

a man's hand holding a pen and signing a contract


Fixed-Term Contracts

Employment relationships develop in a variety of different ways. A common employment relationship is the fixed-term employee. This is a situation wherein an employer hires a particular person to work for a specific term. For example, you are hired to work from July 1st, 2019 to December 31st, 2019.

If you are hired to work for a specific term, your employment contract would outline when your final day of work is and the expectation is that you are aware of your final date and will not work after that time. Employers can run into a few sticky situations should they not honour the terms of the contract.

Early Termination

If the employer terminates the employee prior to the end of the term of the contract, this may be considered a wrongful dismissal. If the contract does not contain specific wording about how the employer can terminate the contract early, the normal measure of damages is the unexpired portion of the contract. For example, your contract is meant to end April 1, 2019 but you are terminated February 1, 2019. You are likely entitled to compensation for the period from February 1, 2019 to April 1, 2019.

Reasonable notice of termination does not apply in this particular case because the contract specifically provided for a termination date. Since the parties know when the contract is to end, the fixed-term employee had notice from the commencement of the contract of when it would end.

In the case of Islip v. Coldmatic Refrigeration of Canada Ltd. (2002), 2002 CarswellBC 790, the employee was awarded damages for the entire one year contract even though he had not even begun employment as the employer repudiated the contract prior to his start date.

Continuous Fixed-Term Contracts

Some companies become subject to hiring freezes or other policies which prevent it from hiring on permanent employees. To avoid a staffing shortage, they can often get around these policies by hiring employees on a fixed-term basis. However, if the company continues to re-hire the same person for several years on a series of fixed-term contracts, the company could find itself in hot water when the employment relationship comes to an end.

In this circumstance, the fixed-term employee can make an argument that because they worked for the company for several years despite the fixed-term nature of the contracts, they are actually considered a permanent employee. This can be established if the fixed-term contract employee was always treated like a regular member of the team, received similar or the same benefits and the employer conducted itself in a manner consistent with that of a permanent employment relationship. Therefore, when the relationship ends, the fixed-term employee can argue for reasonable common law notice.

Working Past the Expiration Date

If you are subject to a fixed-term contract and continue to work past the end date without anything said about a contract renewal, the employment could be presumed to be for an indefinite period and the reasonable common law notice provision may apply when the relationship ends.

In the case of Roberts v. Zoomermedia Ltd., 2017 ONCA 327, the Ontario Court of Appeal affirmed that when an employee continued to work after the fixed term contract, it became a “common law” relationship and the employee was entitled to the benefits of indefinite term employees.

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