This past February 1st, a noteworthy decision was
rendered by Justice Lukasz Granosik of the Quebec Superior
Court1, concerning the automatic renewal of a fixed-term
employment contract through the operation of a provision in the
Civil Code of Québec (the "Civil
When Mr. Danny Kennel ("Kennel") was
hired by Traffic Tech Inc. ("Traffic
Tech") in January 2000, he signed a fixed-term
employment contract of three years' duration that included a
non-solicitation clause as well as a confidentiality clause. The
contract also contained penal provisions and provided for the
renewal of the contract upon prior notice by the employer of at
least 60 days before the expiration date.
In 2004, a new employment contract containing essentially the
same conditions was signed by the parties, again with a fixed-term
of three years.
Prior to the expiration of that contract in 2007, Traffic Tech
gave no prior notice of its intention to renew it. Kennel
nevertheless continued to work at the company following the
expiration date, with no objections on the part of his
No additional employment contract was ever signed by the
Kennel had been in the employ of Traffic Tech for 12 years when
he voluntarily left the company in 2012, taking three other
employees with him, to work for a direct competitor in a similar
After leaving, Kennel was sued by Traffic Tech in Superior
Court, for nearly $1.3 million.
Traffic Tech alleged that Kennel had breached the
confidentiality and non-solicitation clauses in his employment
contract. Kenny maintained that the contract was no longer in
effect when he left the company.
The Superior Court's reasons
Since the parties had never used the renewal mechanism provided
for in the employment contract, Article 2090 of the Civil
According to the Court, the employment contract was tacitly
renewed for an indeterminate term upon its expiration, pursuant to
Article 2090 CCQ.
However, based on interpretations of Article 2090 in the case
law3, the Court concluded that the renewal applied only
to the essential conditions of the employment
According to the Court, the word "essential" signifies
the indispensable and fundamental aspects of the employment
Thus, according to this interpretation, salary, hours of work
and vacation entitlements are such indispensable and fundamental
aspects. Moreover, the clauses in the contract that are unrelated
to those aspects are deemed to be non-essential conditions to which
tacit renewal does not apply.
It thus emerges from the Court's reasons that
non-solicitation clauses, confidentiality clauses and penal clauses
in a fixed-term employment contract will not be considered
essential conditions of the contract and accordingly will not be
tacitly renewed upon its expiration.
Traffic Tech's action was thus dismissed. The Court
concluded that the parties had never renewed the 2004 employment
contract and that Kennel had no specific obligations towards his
former employer other than those flowing from the essential
contractual conditions of his employment and those imposed by
In addition to setting an important precedent5, this
decision will definitely have a concrete impact on employer's
practices with respect to employment contracts prepared by
Specifically, to the extent that a manager wishes to include
non-competition, non-solicitation or confidentiality clauses in the
employment contract, an in-depth analysis will need to be
undertaken at the time of hiring in order to determine the
advisability of entering into a fixed-term contract or one of
Also, to the extent that fixed-term employment contracts are in
effect with current employees, caution must be exercised when those
contracts approach their expiration date, as the employer must
decide whether to renew the contract in writing or enter into a new
agreement stipulating the appropriate obligations on the part of
the employee, so that those obligations do not become unenforceable
upon the expiration of the contract.
1. Traffic Tech Inc. v. Kennell, 2016
2. 2090.A contract of
employment is tacitly renewed for an indeterminate term where the
employee continues to carry on his work for five days after the
expiry of the term, without objection from the
3. Racine et Chamberland Inc. v.
Ouellet, J.E. 2001-2160 (S.C.) and Vision Globale A.R.
Ltée v. Harel, 2008 QCCA 904
4. Supra, note 1, par. 47
5. At the time of writing, the decision had not been
appealed. We will be monitoring this file closely, and how the
decision is applied in the case law.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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