There is a lot of constant chatter and discussion among employment lawyers about employment contracts or agreements between employers and employees relating to the preparation of employment agreements, their interpretation, their critique and their invalidation (especially the termination clause of these contracts). Employment contracts are often complicated as the employer seeks to minimize risks upon terminating the employee’s employment while the employee seeks to maximize their employment entitlements. There are copious amounts of cases involving employment contracts, and it is one of the more contentious areas of employment law.

However, the core of what an employment contract is, is relatively simple. An employment contract or employment agreement seeks to be a legally binding agreement that sets out the terms, conditions, rights, obligations, etc. of an employee’s employment. This contract or agreement will include information about an employee’s role and responsibilities related to their job (such as their job title or their job duties), their pay or income, vacation time, various benefits and workplace or employment policies. There are a variety of common clauses that employment lawyers routinely observe in employment agreements including clauses relating to layoff rights, probationary periods, vacation pay, benefits, etc. One of the most important clauses contained in an employment agreement would be the “termination clause.” A termination clause sets out how the employee will be terminated (or “fired” or “dismissed”) and what notice they are entitled to upon termination. Employment agreements may even be entered into verbally between employer and employee, but these typically do not provide employers with a great level of protection.

We have written about employment agreements and employment contracts extensively. Please see:

• What You Need to Know About Employment Contracts
• Why Employers Should Have their Employment Contacts Prepared by an Employment Lawyer and Reviewed on an Annual Basis
• Risks of DIY Employment Agreements: Why Hire a Lawyer

What are fixed-term employment agreements?

The most common type of employment contract or employment agreement is the indefinite-term contract. This means that the contract does not necessarily have a set end-date. However, this blog seeks to dive into the complexities of fixed-term contracts. Simply put, fixed-term contracts have a set end-date to the employment relationship between employee and employer.

Fixed-term contracts are generally used in situations where an employe may have to fill a position on a short-term basis, such as when another employee who normally works in the position is not available for a period because the other employee is away on a leave of absence from work. Another common reason that an employer may seek out an employee on a fixed-term contract basis would be due to the position being related to a specific reason such a single project that needs to be completed but once that project is finished, the employment relationship will be at an end.

There are two complicating factors relating to fixed-term employment agreements

While fixed-term employment agreements and indefinite-term employment agreements are similar in some respects, they have significant differences that can lead to complications.

The first complication is if the employer decides to end the employment contract before the specified end date as set out in the agreement the employee would normally be entitled to the dollar value of the balance of the term of the contract.  For example, an employee may be entitled to all compensation such as pay and wages they would have received until the end date under the fixed-term contract regardless of the fact that the fixed-term contract has ended. However, the employer may avoid this outcome by ensuring that the fixed-term contract includes a specific, properly drafted early termination provision.

For more information about these issues and to see these issues applied in a real-life situation, please take a look at our article entitled Zeilikman Law Successful in Motion for Summary Judgement in which we acted for an employee subject to a fixed-term contract.

Further, the employee also does not have to mitigate their damages as they would if the employment contract was one of an indefinite term. So even if they find a new job during the duration of the fixed-term contract, they are still entitled to the same damages for that contract breach unless the fixed-term contract states otherwise.

The second complication is if the fixed-term employment agreement was renewed or extended beyond the end-date as set out in the fixed-term employment agreement. If this occurs, the fixed-term employment agreement may change to that of an indefinite-term employment relationship regardless of the existence of a fixed-term contract. The employee would therefore be entitled to the same compensation and entitlements like reasonable notice at common law that an employee would be entitled to upon dismissal if they had been working under an indefinite-term contract.

How Zeilikman Law can help

You should approach an employment lawyer if you have any questions or concerns relating to fixed-term employment contracts. There can be some significant complicating factors related to these legal issues especially if the fixed-term contract ended earlier than what was set out in the contract or if the contract was renewed on a continued basis. Employers and employees alike should keep this in mind when contemplating a fixed-term contract arrangement.

You can reach us at (905) 417-2227 or here to schedule a confidential consultation with one of our employment lawyers.