Fixed-term Contracts: 10 Things You Should Know

Due to our current economic climate, an increasing number of employees are being hired on for fixed-term contracts. A fixed-term contract is one that either ends on a specified date or lasts until a specific task is completed.

This type of employment relationship raises unique concerns and issues as compared to a full-time or indeterminate employee.

Below, we have summarized the 10 most important facts associated with fixed-term contracts:

1. Fixed-term employees (for which the term of the contract has yet to expire) are not entitled to reasonable notice when their contract ends, or to the notice provisions found in the Employment Standards Act, 2000. They are, however, entitled to damages if terminated prior to the end of that fixed term, subject to the existence of a valid termination clause.
2. If a fixed-term employee is terminated prior to the end of the contract term, they are not required to mitigate their damages by seeking alternative employment (please see our previous blog for more information on mitigation in the fixed-term contract world).
3. A fixed-term contract cannot be binding for longer than 9 years. However, this can be waived in the case of any manager, officer or superintendent.
4. Fixed-term contracts must comply with the provincial legislative entitlements and account for prior service.
5. The courts require a fixed-term contract to contain “unequivocal and explicit language” in order to be legal and enforceable.
6. Fixed-term contracts “for life”, or until the employee’s retirement, may be legal and enforceable but require “even clearer articulation, given the profound financial responsibility of such a guarantee” (as clarified in Foreman v. 818329 Ontario Limited).
7. The court may find a fixed-term contract to actually be an indefinite-term contract if the employer signals an indefinite term through their conduct, verbal representations, the employee’s continuous service or through multiple successive fixed-term contracts.
8. Courts may not find an employment relationship to be pursuant to a fixed-term contract if it includes an “anticipated” end date.
9. If a fixed-term contract gives the employee a right of renewal, the employee may be entitled to damages should he or she be deprived of this right.
10. If a fixed-term contract ends and the employee continues working without anything said about its renewal, the employment is presumed to be for an indefinite period on the same conditions as the earlier contract.

Although fixed-term contracts can be complicated, it is important to understand your rights and entitlements. What is described above is a very basic set of factors, all of which will be based on the individual contract and on individual circumstances. If you have questions about your fixed-term contract, one of our employment lawyers can help you.