Fixed-Term Contracts

Most employees are hired as "indefinite-term" employees meaning that when their employment commences, there is no identified end-date to the employment. At common law, this type of employment may only be terminated upon reasonable notice provided there is no just cause for summary dismissal. In contrast, fixed-term contract employment implies that at the beginning of the term the parties agreed upon the "notice" by agreeing upon the term or length of the employment.

But what happens when long-term employment is governed by a series of fixed-term contracts? What amount of notice upon termination of employment is fair in this situation? Let's look at a specific example: Ceccol v. Ontario Gymnastic Federation (Ontario Court of Appeal, 2001). In this case, Ms Ceccol was employed for 16 years pursuant to fifteen consecutive one-year contracts. Her yearly contracts concluded at the end of June each year. The contracts stated that any entitlement to notice of termination employment without cause would be governed only by the Employment Standards Act, which provides a minimum amount of notice upon termination of employment without cause. In December 1996, her employer advised her that in June 1997 her contract would not be renewed or extended. She was paid until June 30, 1997 and the company paid her ex gratia payments of three months of her salary provided she signed a release. She declined this offer and sued her employer hoping to have the Court find that she was really an "indefinite-term" employee and thus was entitled to reasonable notice as determined by the common law as opposed the minimum amount provided by the Employment Standards Act. The case turned on the characterization of the employment: whether "indefinite" or "term".

The trial Court found that both Ms Ceccol and her supervisors believed and acted as if she was in fact a "full-time" permanent employee. In short, the Court looked behind the successive term contracts and found that Ms Ceccol was an "indefinite term" employee. She was awarded reasonable notice in accordance with the principles of common law, which the Court found was sixteen months. This was reduced by four months because she failed to properly mitigate her damages.

The employer appealed the trial Court decision to the Ontario Court of Appeal. The Court of Appeal stated that employers should not be able to avoid the traditional protection of the common law by "resorting to the label of 'fixed-term contract' when the underlying reality of the employment relationship is something quite different, namely continuous service..." In addition, the Court found that the language contained in the contract as it related to the extension of the contract was not clear enough to satisfy the Court that the contract was intended by the parties to be for a fixed term only.

If you have been employed for several or many years pursuant to a series of fixed-term contracts, you should have your situation reviewed by an employment lawyer. The above is not legal advice.

Leslie J Smith practises law in Oakville, Ontario. She can be reached at 905-845-0767.