Fixed term contract proves costly for employer

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The Supreme Court of Canada has refused to consider an employment appeal, ending a costly battle for one Ontario employer and serving as a stark warning to others.

In the case, which had been previously upheld by the Ontario Court of Appeal, an employee had signed a five-year fixed term agreement provided by the employer. The worker was dismissed without cause 23 months later and sued his former employer, claiming entitlement to the remainder of the five-year term.

Unsurprisingly, the employer disagreed and pointed to a specific clause within the agreement which noted that the employee could be terminated at any time and any amounts paid would be in accordance with the Employment Standards Act of Ontario.

However, the Ontario Court of Appeal found that because the employee was hired under a fixed term agreement, he was entitled to more than common law notice and ruled he should be paid for the remainder of the five-year term.

Interestingly, the appeal court also found that the employee was not required to take steps to mitigate his damages and the Supreme Court of Canada, by refusing to hear the appeal, approved this decision.

“This case is a useful reminder to all employers about the care that needs to be taken in drafting employment agreements,” said leading employment lawyer Glenn Tait.

“Employment agreements, and especially employment agreements for a definite term, must include clear and unambiguous termination provisions,” he added. “The consequences of not doing so, as this case shows, can be very expensive.”

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