What Severance is an Employee Entitled to under a Fixed Term Employment Contract?
The Ontario Superior Court’s Decision in Ballim v. Bausch & Lomb Canada Inc., 2016 ONSC 6307
The plaintiff, Ms. Samina Ballim (hereinafter “Ms.Ballim”) brought a motion for summary judgement against the defendant, Bausch & Lomb Canada Inc. (hereinafter “Bausch & Lomb”) for breach of contract and wrongful dismissal. Ms. Ballim’s motion was based on her termination without cause.
Ms. Ballim was offered and accepted a one-year fixed term employment contract from Bausch & Lomb commencing November 18, 2015, to replace an employee going on maternity leave. The employment agreement stated that it ‘was on a contract basis’ and that Ms. Ballim “would receive payment of $2,230.77 bi-weekly in 26 installments” (para. 4).
After a month of her employment with Bausch & Lomb Ms. Ballim sought management`s approval for an unpaid leave of absence on compassionate grounds. Her leave was approved, but one day after her return to work Ms. Ballim was advised that her employment was terminated on a without cause basis. Ms. Ballim worked for Bausch & Lomb for a total of three (3) months. Bausch & Lomb argued that Ms. Ballim was entitled to one (1) week’s pay in lieu of notice under the Employment Standards Act, 2000, however were willing to provide Ms. Ballim with two (2) weeks’ pay based on unused vacation she was entitled to take.
Ms. Ballim obtained new employment in May 2016, however, she argued that she was entitled to recover damages for the remainder of the unexpired term of the contract.
The principal issue for the Court to consider was whether the employment contract between Ballim and Bausch & Lomb was for a fixed or indefinite term.
Ontario Superior Court’s Decision
The motion judge first noted that when dealing with determining whether an employment agreement is for a fixed-term, “[t]he employee has the onus of establishing the contract was for a fixed-term.” (para 18). This is due to the fact that fixed-term contracts are an exception to the general rule of employment contracts. As such, to establish a contract as “fixed, the intention of the parties must be clearly expressed and unequivocal.”(para 18).
The motion judge determined that based on the provisions in the contract that Ms. Ballim was to be paid in twenty-six (26) installments, was expressly stated that it was to be for one (1) year in duration and that although there was no precise end date, it could easily and readily be inferred as one (1) year from November 18, 2015. As such, it was held that the parties had entered into a one (1) year binding contract for employment. With respect to damages, the motion judge noted that in accordance with Howard v. Benson Group Inc., 2016 ONCA 256, “a fixed term employment contract obligates an employer to pay an employee to the end of the term and that obligation will not be subject to mitigation.” (para 27) Meaning, Ms. Ballim was entitled to all damages arising from the breach of the contract totaling thirty-eight and a half (38.5) weeks, less two (2) weeks Bausch & Lomb already paid.
The foregoing is a recent example of the degree of liability an employer may have when they employ people on fixed-term contracts. Unless a fixed-term contract includes a specific, properly drafted termination provision, the employee would normally be entitled to the balance of the term of the contract. Therefore, proper contract drafting is vital for employers to limit their potential liability. From the employees’ perspective, it is advisable to understand all aspects of your employment contract and what you are entitled to. Also, an important contrast between fixed-term contract obligations of an employee at termination as compared to an indefinite employment contract, is that an employee is not required to mitigate their employment loses, unless the fixed-term contract states otherwise.
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.