Fixed Term Employment Contracts
By Melynda Layton LLB
As Published in January 2002 Issue of
Up-Date OHRPA Newsletter
At common law a contract of employment is terminable only upon provision of reasonable notice of dismissal. This is a rebutable requirement which does not apply to fixed term employment contracts. The consequences of finding an employment contract is for a fixed or “definitive” term are serious - neither the Employment Standards Act 2000 of Ontario nor the common law principle of reasonable notice apply.
A recent decision of the Ontario Court of Appeal confirms jurists are particularly vigilant when interpreting a series of fixed term employment contracts signed by long-term employees. While fixed term employment contracts are a common mechanism for reducing liability upon termination of employment they must be clear and unequivocal before they will legally be enforced.
Diana Ceccol was employed with the Ontario Gymnastic Federation for sixteen (16) years pursuant to fifteen (15) annual contracts. Each contract contained a termination date. The last contract indicated Ms. Ceccol was employed for a twelve (12) month period commencing July 1, 1996 and terminating on July 30, 1997.
The Ontario Gymnastic Federation terminated Ms. Ceccol’s employment, without cause, alleging her entitlement to reasonable notice was limited to the Employment Standards Act of Ontario minimum requirements in accordance with the employment contract.
At trial, the Honourable Mr. Justice Pitt found Ms. Ceccol was entitled to reasonable notice of the termination of her employment. In reaching this conclusion the Court noted the employer acted as though Ms. Ceccol was employed for an indefinite term. The contract of employment was simply the vehicle by which the terms and conditions of the new employment agreement were negotiated. Ms. Ceccol was treated as an ordinary full–time employee, it was not anticipated she was on a year-to-year contract. During her initial interview the employer advised Ms. Ceccol the position was a full-time permanent one. As the Administrative Director of the Federation she was essentially the number two person in a fourteen (14) person office. She was charged with the responsibility of managing the affairs of the corporation. It was inconceivable such an important position would be assigned on a yearly basis.
The Ontario Gymnastic Federation appealed the trial court’s decision alleging Ms. Ceccol was employed pursuant to a fixed term employment contract which could be terminated upon compliance with the Employment Standards Act of Ontario minimum entitlements. Justice MacPherson, speaking for the majority of the Court of Appeal, rejected the appeal, finding Ms. Ceccol was entitled to sixteen (16) months notice of the termination of her employment rather than the legislatively regulated eight (8) week minimum.
The court unanimously agreed the relationship between the parties was long-term where termination at expiration of the contract was not anticipated.
The court found employment contract was unclear as to what the Federation’s obligations were upon termination of employment. The contract was capable of two interpretations. This coupled with the fact the Gymnastic Federation failed to comply with the Employment Standards Act when it notified Ms. Ceccol her employment was terminated undercut its position, and led the court to conclude, Ms. Ceccol was entitled to reasonable notice of the termination of her employment.
When determining whether a fixed term employment contract is appropriate, it is important to consider the following:
- Length of Service - it is more difficult to allege an employee was hired for a fixed or definitive term when they have enjoyed long term service with the employer;
- Verbal and Non-Verbal Representations - where it is represented to the employee, during the initial interview and after commencement of employment, the relationship is long-term there is a presumption against a fixed term employment agreement;
- Restricting Liability - ensure within the employment agreement, liability, upon termination of employment, is limited to the Employment Standards Act 2000 of Ontario minimum requirements;
- Comply with Contractual Obligations - where the employment contract includes an early termination clause ensure termination is perfected in accordance with the agreement; and
- Preclude Automatic Renewal of Contract of Employment - ensure renewal of the agreement is at the discretion of the parties rather than upon good performance, or similar consideration.
A clearly worded employment contract will alleviate the risk and minimize liability associated with fixed-term employment contracts. Managers charged with the responsibility of negotiating employment agreements must be cognisant of their obligation to properly represent the nature of the agreement. At all times, both prior to commencement of the employment relationship and thereafter, the employer must ensure the employee is consistently advised their employment is for a fixed or limited period and will be terminated at the expiration of the "definitive" term.
To ask a question or for further advice please contact Melynda at melynda.layton@careerlaw.ca or by telephone at 613-225-4400
