Most employers hire employees on a contract for an indefinite term. Some employers, however, hire employees on a contract for a fixed term, called “fixed-term contract employees”.
Fixed-term contract employees may be defined not only by a definite period of time but also by the duration of a specific task or by a specified event.
A common misconception about fixed-term contract employees is that they are always limited in terms of notice of termination or severance entitlements. In actuality, different notice of termination or severance entitlements apply by law in different circumstances. Read on to learn more about the rights of contract employees in Ontario.
Note: This article applies to contract employees, not independent contractors. To read more about Independent Contractors and how we protect your employment rights, click here.
Rights of Contract Employees in Ontario
Typically, if a contract employee is on a fixed-term contract, and if they are terminated at the expiry of the fixed term, they get no severance. An employer is not required to provide notice of termination at common law when the term expires, since the employment agreement simply terminates in accordance with the contract.
While the common law implies a term in contracts of indefinite employment requiring an employer to provide reasonable notice upon terminating an employee without cause, there is no such implied term in fixed-term employment contracts.
In other cases, if a contract employee is on a fixed-term and they are terminated before the expiry of the fixed term, they do get severance. The amount of severance they are entitled to will be stated in the employment contract, or it will be the balance of the fixed term if the contract is silent on severance or the termination clause in the contract is unenforceable. The latter can be a massive windfall for the employee at the cost of the employer.
In other cases, where the contract employee has been subject to a series of contracts that were renewed as a formality then the fixed-term contract employee may be a contract employee of indefinite duration entitled to reasonable common law notice (i.e. severance).
Indeed, In Canada, courts are inclined to find an indefinite term contract, rather than a fixed-term contract where there are a series of contracts that were renewed as a formality because termination without notice/severance is generally perceived to be unfair. It could be that the employer was using fixed-term contracts to get out of its obligation to pay severance. To that end, in Canada, employment contracts are presumptively for an indefinite term, and terminable only on reasonable notice or compensation in lieu of notice.
The requirements for a valid fixed-term contract were described well by the Alberta Court of Appeal in Alguire v Cash Canada Group Ltd, 2005 ABCA 387 at paragraph 5:
A true fixed-term employment contract requires “unequivocal and explicit” language: Ceccol v. Ontario Gymnastic Federation. Any ambiguities will be interpreted strictly against the employer’s interest. In interpreting the contract, the objective is to discover and give effect to the real intention of the parties.
The courts are more likely to find that a fixed-term contract employee is actually an indefinite contract employee when much of these factors are demonstrated:
- The employee worked for the company for a long time;
- Verbal representations and conduct on the part of the parties signal an indefinite term relationship;
- There were never Records of Employment issued for the various terms;
- Generally, the parties only negotiated remuneration at the end of the fixed term;
- The relationship had evolved over time so that the employee could reasonably and legitimately expect employment would be continued beyond a fixed term each and every time;
- The employee had performance reviews conducted on an annual basis. Fixed-term employees do not expect to be appraised and promoted; they expect to work the job until it is complete without review. However indefinite employees do expect an annual review that they can use to learn from and grow, becoming more attached to the employer;
- The employee occupied a “key” position where he was trusted and had increasing responsibility;
- The employee was subject to the employer’s Code of Conduct;
- The employee was a member of a company-sponsored pension plan or a benefits plan;
- The employee’s work responsibilities and the investments made into his training were long term, clearly outliving the terms of a fixed-term contract of three years;
- The revolving contracts were standard form. The only thing that changed was remuneration;
- The employee’s job title has not changed;
- The employee’s duties were codified in the employment contract, signifying that the true relationship was not defined to a fixed, static agreement that explicitly referred to each and every condition of employment that could not change and evolve over time.
See our article on fixed-term contract employees, which covers how cases such as Ceccol v. Ontario Gymnastic Federation, Thompson v. Cardel Homes Limited Partnership and Flynn v. Shorcan Brokers Ltd. have improved contract employees’ severance entitlements.
Call a Toronto Contract Employee Lawyer for Advice
Considering the various circumstances of termination for fixed-term contract employees, it is essential that, regardless of your employment categorization, you obtain independent legal advice regarding the termination of your contract (or if your contract is not renewed). This is especially true where you have been given an inadequate or non-existent severance offer.
What’s more, each case is different, and special caveats and exclusions can apply in every case. For example, even if someone is terminated at the expiry of their fixed term, and while they normally get no severance, they should still speak to an employment lawyer in a free consultation to determine whether any special facts would entitle them to a severance. For instance, the contract could be void, and generally, only a contract employee lawyer can determine that.
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