Employers often debate whether to engage people for an
indeterminate period, or for a fixed term.
While there may be a superficial attractiveness to fixed term
Employment Agreements, they are not without their difficulties.
True, as a general proposition, when they come to an end they do so
without the requirement of further notice or compensation. Note
however the Ontario Court of Appeal decision in Ceccol v.
Ontario Gymnastic Federation, 55 OR (3d) 614 for the
proposition that a series of fixed term contracts can in some
circumstances eventually amount to an “indefinite
hiring” subject to termination only upon reasonable
The same difficulty arises where the parties, through
inadvertence, continue the employment relationship beyond the end
of the fixed term. Again, the contract then becomes indefinite
subject to the common law entitlement to reasonable notice as well
as all of the protections of the Employment Standards
Employers should also be aware that if they have a change of
heart in the middle of a fixed term arrangement, they may have far
less flexibility than would have been the case with an indefinite
arrangement subject to an enforceable contractual termination.
Absent such contractual termination provision, the employee is
entitled to receive the compensation and benefits which would have
accrued to the end of the fixed term.
A recent decision from the Alberta Court of Appeal serves as a
reminder of the inflexibility of fixed term arrangements.
In Thompson v. Cardel Homes Limited Partnership, 2014
ABCA 242, the court was asked to assess the entitlements of a
senior executive working for a Calgary home builder pursuant to a
series of two fixed term agreements, the second of which provided
for a severance payment in the event of early termination.
“…3) By Cardel in its absolute discretion for any
reason other than cause, at any time by providing you with written
notice to that effect, which notice shall provide for a termination
date which is effective as of the date of the said notice, and
without further obligation to you other than those obligations of
Cardel set out in clause (4) below.
4) Where your employment under this Agreement has been
terminated by Cardel under clause (3), you agree and acknowledge
that you shall be entitled to receive from Cardel, in addition to
outstanding entitlements to unpaid Yearly Salary and outstanding
vacation pay to the effective date of termination, as well as any
pro-rated share of profit sharing that you are entitled to (see
Profit Sharing section of the contract), your entitlements under
the Alberta Employment Standards Code (“ESC”)
for notice and or compensation in lieu of notice. ... Additionally,
you shall be entitled to receive a lump sum payment the
(“Severance Payment”), of twelve (12) months base
salary earnings. ... The total statutory notice and
“Severance Payment” payable under this paragraph shall
not exceed 12 months of “Yearly Salary” at the date
notice of termination is provided.”
Rather than simply allowing the fixed term to expire on October
22, 2011, the employer delivered a letter to the employee one month
in advance advising that the employer would not be entering into a
new agreement with the employee.
This much would likely have not led to the result which ensued;
however, the employer then proceeded to relieve the employee of any
further duties during the balance of the contract. The employee was
required to return all company property including his key card,
building keys, computer and password and to gather his personal
effects. His business email access was removed and third parties
were advised that he was no longer with the company.
The court held that this conduct amounted to a termination of
the employee’s contract and rejected the employer’s
argument that the employee had somehow condoned the early
termination by collecting his final month’s salary, benefits
and profit share without protest. In the result, the Court of
Appeal upheld the Judge’s award in the amount of
Arguably an employer runs the risk of an adverse finding
whenever there is a unilateral substantial change to a significant
aspect of the employment relationship. In most fixed term
contracts, this would lead to damages representing the compensation
and benefits that would have been received by the employee over the
unexpired balance of the term.
This case is another reminder that employers need to think
carefully about the flexibility they forego before selecting fixed
term arrangements for their employees.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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