Termination of Fixed-Term Contract Employees – Toronto Employment Lawyer

When someone signs a fixed-term employment contract, they know that their employment relationship is intended to only last for a specific and definite time period. Upon completion of this time period, the fixed-term employment relationship can either be renewed or ends. However, what happens if the employer decides to end your contract early? What are your rights?

Since Howard v Benson, 2016 ONCA 256 (CanLII) which held that fix-term contract employees who have no early termination provision are not entitled to common law notice of termination, but instead breach of contract damages amounting to the amount of money they would have earned under the contract, regardless of whether they have found new employment. The same logic was applied in the case of Mohamed v. Information Systems Architects Inc., 2017 ONSC 5708 (CanLII), where a fixed-term contractor (not employee) whose early termination clause was found to be invalid, was entitled to compensation for the rest of his contract, as though there was no early termination clause. This was also reaffirmed in Mohamed v. Information Systems Architects Inc., 2018 ONCA 428 (CanLII).

More recently in the case of Norgren v. Plasma Power LLC, 2018 ONSC 3186 (CanLII) the Plaintiff, a fixed-term employee of a three-year contract was awarded 8 months of notice of termination as a result of early termination after two years.

Mr. Norgren was employed as the Project Capital and Financing Vice President where his annual salary amounted to $166,000.00. Mr. Norgren signed a three-year fixed-term contract; however, he was terminated after only 23 months. At trial, Mr. Norgren argued compensation for the remainder of his contract, or as an alternative, compensation for reasonable notice of his termination.

There were two important issues at trial:

1.  Is Mr. Norgren’s employment governed by a fixed term contract?

2. If Mr. Norgren’s employment is not governed by a fixed term contract, what is the reasonable notice owed to him?

In addressing the primary issue, Justice Labrosse examined language within the contract which stated: “This agreement will time out in 3 years and the goals will be reset”. The Judge determined that this language was ambiguous, and there was nothing within Mr. Norgren’s contract that would suggest that after the three years, his employment would be over. Due to the lack of clarity, Justice Labrosse determined that Mr. Norgren was in fact employed for an indefinite term.

Since the Plaintiff was determined to in fact be an indefinite employee he was entitled to common law notice of his termination, instead of the balance of the contract. Despite his short tenure (23 months) with the Defendant, the Judge determined that due to other important factors such as his age (53 years old), the lack of comparable employment, and his higher paying position, Mr. Norgren was entitled to eight months of notice of termination. Additionally, the Plaintiff was also awarded $10,215.00 in vacation pay, and $8077.00 representing his entitlement to his share of equity units. Conversely, had it been found to be a fixed-term contract he would have been entitled to 13 months of notice.

If you are unsure if you are fixed-term employee and your contract has been terminated, or you would like to know more about your entitlements under the law, call Monkhouse Law today for a free 30-minute phone consultation.

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