What is a Fixed-Term Employment Contract? What to Know

In Ontario law, an employment relationship can be based on a simple verbal understanding and agreement, or it can be codified in writing. This is call an employment contract. The purpose of an employment contract is to set out in detail all of the terms and conditions of the relationship between an employer and employer, including start date, employee’s job title, compensation details, right to modify the employment relationship and termination of employment.

Types of Employment Contracts

Generally, a written employment contract can be either an indefinite term employment contract or a fixed-term employment contract.

Indefinite Term Employment Contracts

These are the most common types of employment contracts, in which an employee is hired and continues to be employed on a permanent basis. However, this does not mean forever. In other words, the employment relationship continues until either party terminates the employment relationship:

the employee decides to walk away from their job (abandons employment or voluntarily resigns their job, in which case they forfeit their right to receive a financial severance package); or
the employer terminates employment for just cause (serious misconduct justifying no prior notice of termination, or alternatively, a severance package) or without cause (no specific reason, in which case they employer must provide the employee with prior notice of termination, or a financial severance package)

In most wrongful dismissal cases, an employee is entitled to a severance package either because the employer alleges (but cannot justify) terminating the employee for just cause, or otherwise terminates employee without cause and does not provide sufficient prior notice of termination or severance package. In either case, unless the employee has signed an employment contract with a valid termination clause limiting their termination pay and severance pay (severance package) entitlements to the statutory minimums under the Ontario Employment Standards Act, 2000, the employee is entitled to sue for breach of contract (wrongful dismissal or constructive dismissal), where a court will generally provide them with an amount of damages (compensation) under common law, which varies depending on the employee’s:

age
years of service
type of position
type of compensation
educational, skills and career qualifications
current economic or labour market environment

Fixed-Term Employment Contracts

As the name implies, a fixed-term employment contract means the employment relationship has a specific start date and end date, such that both the employer and employee know how long the relationship will last from the outset. In other words, there is a clear expiry date on the employment contract.

Unlike with an indefinite employment contract, the termination of a fixed-term contract prior to its term entitles the employee to payment of all the income that he or she would have earned for the remainder of the employment contract unless the contract expressly stipulates the period of notice or there is cause for termination. For example, in a recent case called Tarras v. The Municipal Infrastructure Group Ltd., 2022 ONSC 4522, an international engineering firm who wrongfully terminated the three-year employment contract of the company’s Vice President 13 months into the contract was required to pay him compensation for the remaining 23 months of the employment contract, amounting to $479,166.67.

Lastly, unlike an indefinite employment contract, the Ontario Court of Appeal has found in a number of cases, including Howard V Benson Group Inc, McGinty v. 1845035 Ontario Inc., and Livshin v. The Clinic Network Canada Inc., there an employee has no duty to mitigate if their fixed-term employment contract is wrongfully terminated by the employer.

Call an Employment Lawyer in Toronto

For an employee who believes they were wrongfully dismissed, it is important to speak with an experienced Toronto wrongful dismissal lawyer as soon as they are told by an employer that their employment will be terminated. If you are an employee who believes you have been wrongfully dismissed and the decision to terminate was unjust or discriminatory, please speak with our experienced wrongful dismissal lawyer in Toronto regarding your options, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

Contact us by phone 647-822-5492 or fill out the contact form to the side. Our employment lawyer in Toronto would be happy to assist in your employment law matter as quickly as possible.

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