A few months ago we
commented on a case where a fixed term contract caused an
employer significant liability because it did not allow for early
termination prior to the end of the fixed term. The Ontario Court
of Appeal recently released a decision, Howard v. Benson Group Inc.
("Howard"), which provides a further
warning about the use of fixed term contracts.
In Howard, the employer used a 5 year fixed term contract and
terminated the employee, without cause, 23 months into the fixed
term. The employment agreement contained the following clause that
the employer sought to rely on: "Employment may be
terminated at any time by the Employer and any amounts paid to the
Employee shall be in accordance with the Employment Standards Act
This clause was found to be ambiguous and unenforceable, meaning
that the employee was entitled to the value of the entire fixed
term. Interestingly, the Court of Appeal overruled the Trial Judge
and also found that the employee was not obligated to search for
new work or otherwise mitigate his damages, stating that
"[i]n the absence of an enforceable contractual provision
stipulating a fixed term of notice, or any other provision to the
contrary, a fixed term employment contract obligates an employer to
pay an employee to the end of the term, and that obligation will
not be subject to mitigation."
This case is a good reminder for Alberta employers about the use
of fixed term contracts (also see Michela v. St. Thomas of Villanova Catholic School
2015 ONCA 801 where the teachers on fixed term contracts were
awarded 12 months' reasonable notice). They may sometimes be
preferred over indefinite term contracts in certain situations, for
example where an employee is hired for a short and definite time
period or to complete a specific project. Likewise, they can be
used effectively, but it is crucial that they contain a properly
drafted clause that allows for early termination on a without cause
basis. Without this clause, the employer can expect to be on the
hook for the entire remainder of the contract, possibly with no
duty for the employee to mitigate his or her damages.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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