Are fixed-term contracts really worth it?

Are fixed-term contracts really worth it?

Are fixed-term contracts really worth it?

We spoke to Vancouver-based Nicole Howell, founding partner at HHBG Employment Lawyers, who said the short answer is ‘no’.  She explained the significant pitfall for employers who opt for a fixed-term contract.

“Typically, employers want a fixed term contract because they can’t afford to hire a permanent employee, or the work is for a specific project or a set time period, or they want to avoid severance obligations she told us.

The reality is that fixed-term contracts are misunderstood.   If there is no early termination provision in the fixed term contact, employers are liable to pay out the balance of the fixed term.  A huge cost for employers if the termination occurred early on in a 5 year fixed-term! 

Even if employers ensure they have an effective termination clause, if the fixed-term contract ends and the employee continues working, the fixed term contract no longer applies as the term is up.  The employee automatically reverts back to their right to reasonable notice under the common law.   In that event, their rights are based on a factual matrix:  their age, position, length of service, and the availability of other jobs.  Their entitlement could be anything from one month to 24 months.

“What you want is a contract of indefinite hire with a termination clause that effectively contracts out of an employee’s common law right to notice”, says Howell.

Employers also need to consider the BC Employment Standards Act, which applies to most employees and most companies in BC (with the exception of federal undertakings, such as banks and telecommunication companies). The BC ESA sets out an employee’s statutory rights – which basically work out to one week for every year of service up to a maximum of eight weeks.”

“When employers make a contract”, continued Howell, “ they need to ensure they don’t go below these minimum statuary rights.  You can literally take the statutory entitlements set out in the BC ESA   and use it in the contract. This is a highly effective way of contracting out of the common law.”

To hear more on fixed-term contracts, as well as the other options available to you, Howell will be speaking at our upcoming Employment Law Masterclass on 5 March, in Vancouver. Register here to see a list of speakers and the daily agenda.