While employment contracts do not come in all shapes and sizes, they do at least come in two general forms: either fixed term or indefinite term. A fixed-term employment contract will specify an end (expiry) date for the employment, while an indefinite term employment contact has no specific end date. In both scenarios (and especially with indefinite term employment contracts), there is usually an employment termination clause that allows for terminating employment under various circumstances. Generally, fixed term contracts are less common than indefinite term contracts in employment.
What is a Fixed-Term Employment Contract?
The purpose of a fixed-term contract is to specifically delineate the employment relationship’s duration – start date and expiry date. In such cases, the employer need not provide notice of termination, since both parties know in advance when the employment will end (assuming it is not ended earlier pursuant to a termination clause). In other words, an employee whose employment contract is not renewed after the stated expiry date will not be considered dismissed or terminated. Instead, their employment simply ceases based on terms agreed to between the employer and employee.
Termination of Fixed-Term Employment
Unlike in an indefinite term employment contract where termination may give rise to an employee receiving a common law severance package, an employer’s decision to terminate a fixed-term contract prior to its term will generally entitle the employee to payment of all the income that he or she would have earned for the remainder of the contract (unless the contract expressly stipulates the period of notice or there is cause for termination). This is because the common law principle of termination on reasonable notice (or pay in lieu of reasonable notice) does not apply to employment contracts of fixed-term duration. Similarly, Ontario Employment standards Act, 2000 generally exempts fixed-term employees from entitlement to notice of termination (or termination pay), severance pay and benefits continuation for a statutory notice period.
As an example, if an employer wrongfully terminates an employee’s job 1.5 years into a 5-year fixed-term employment contract, they will generally be entitled to damages for the salary owed to him under the employment contract.
Continuation of Fixed-Term Employment Contracts
If the employment relationship continues beyond the fixed-term without the parties clearly and unambiguously agreeing to sign an extension, it will generally be held under Ontario employment law that the employment relationship transitions an indefinite employment contract subject to termination on reasonable notice.
Most importantly, unless the fixed-term employment contract specifies otherwise, wrongful termination damages for early termination of a fixed-term contract are not subject to the duty to mitigate. In other words, a wrongfully terminated employee is still entitled to the balance of their wages and benefits that she would have otherwise earned until the end of the fixed-term if it is ended earlier by the employer – even if they start a new job and begin earning new employment income immediately.
Call an Employment Lawyer in Toronto
If you were terminated from your employment with or without severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed many severance packages and are skilled at negotiating improvements. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.