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Court of Appeal Finds No Reasonable Notice in Fixed-Term Employment

Overview

In a recent decision, the Ontario Court of Appeal awarded a former employee restitutionary damages rather than pay in lieu of reasonable notice.

The employee was a manager at an automotive service centre in Bowmanville under a fixed-term, five-year contract. His employer, Benson Group Inc., terminated the employment contract without cause after twenty-three months. The central issue on appeal was whether the employee was entitled to common-law damages for wrongful dismissal or, alternatively, for the money he would have earned had the contract run its course.

At trial, the motion judge found that the termination clause in the contract was too ambiguous so as to displace the common-law notice provision, and therefore awarded the employee pay in lieu of the common-law notice period. On appeal, Miller J.A. found that the contract did displace the common-law notice provision by virtue of the fact that it was a fixed-term contract, entitling the employee to the money he would have earned had the contract not been breached.

Our Thoughts

The decision is notable not only because it is binding law on lower courts, but also because it reminds us that employment law is still fundamentally an area of contract law. Contract interpretation is often a key element of resolving disputes regarding termination. Under the common-law, reasonable notice is calculated on a case-by-case basis, taking into account a variety of factors which may affect an employee’s likelihood in finding alternative employment in a similar field. Absent language to the contrary, the common-law notice period is implied into the employment contract. However, parties may contract out of the common-law notice period. Historically, courts have placed a heavy burden on employers seeking to oust the common-law notice period. Parties seeking to contract out of the common-law notice period must set out their intention to do so with clear, unequivocal language to that effect.  

Employers and employees alike should keep this in mind when contemplating a fixed-term contract. It is always recommended that parties to an employment contract turn their minds to the issue of termination and formulate a clause that best suits both parties’ respective needs.

See: Howard v Benson Group Inc. 2016 ONCA 256 (CanLII)

The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.