Canadian employees are presumptively entitled to
"reasonable notice" of termination. Although this
entitlement can be limited to some extent by contract, an employee
will generally be entitled to some advance notice of the end of
their employment. If advance notice is not given, then the employer
can satisfy this obligation by making a payment equivalent to the
earnings the employee would have received over the notice
The law is very different with respect to fixed-term contracts.
Effectively, in a fixed-term contract the employee is provided with
notice of termination the day she enters into the contract. The
catch is that absent contractual language limiting the
employee's entitlements on early termination, the employee is
entitled to pay in lieu of the balance of the fixed term.
The Ontario Court of Appeal recently clarified and reaffirmed
this principle in Howard v Benson Group Inc. (The Benson Group
Inc.) The employee was engaged as a sales development
manager for an automotive service centre. The employment contract
was of a five year length. The employer dismissed the employee
without cause after twenty-three months of service.
The matter was dealt with at first instance on a motion for
summary judgment. The motion judge rejected the employee's
argument that the presumption of reasonable notice was rebutted by
the employment contract's fixed-term duration. The motion judge
found that the absence of a specific notice provision meant that
the employee was entitled to damages in respect of reasonable
notice, rather than to the end of the contract.
However, this victory for the employer was short-lived. On
appeal, the Court held that the employee was entitled by default to
compensation for the balance of the fixed term.
The Court found that the mere fact that the contract
was a fixed-term contract was sufficient in and of itself
to rebut the presumption of reasonable notice.
The Court also found that it would have been well within the
ability of the employer to draft a clause limiting the
employee's entitlements in the case of an early termination.
The Court interpreted the employer's decision not to do so as
evidence that the employer intended to be bound by the contractual
As a result, rather than the common-law, "reasonable
notice" period for this relatively short-serve employee, which
would likely be at most three or four months, the employer instead
was liable for 37 months of notice, that being the
remainder of the contract. 37 months is longer than any reasonable
notice period ever awarded by a Canadian court.
What Employers Should Know
Employers seeking to use fixed-term contracts to maximize their
flexibility must bear in mind that the law governing employee
entitlements on termination is quite different than that governing
indefinite employment relationships. Unless the employer intends to
guarantee the employee's employment for the duration of the
fixed term contract, early termination language is essential.
Employers must be careful to ensure such language is clear and
complies with local employment standards. Absent such language,
courts will impute the intention to guarantee the duration of the
At the 17th annual Ontario Employment Law
Conference, presented by Stringer LLP and First
Reference Inc., an afternoon Breakout Session will focus on
terminations of employment, including practical advice on how to
assess your organization's potential liability to employees
upon termination of employment. This is one of three afternoon
Breakout Sessions that attendees can choose from. The Ontario
Employment Law Conference will take place at the Corporate Event Centre at CHSI in Mississauga
on June 2, 2016. We look forward to seeing you and
helping you apply the latest employment and labour law changes. Come and learn the
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