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Employment Contracts
Fixed-term versus Indefinite Term Contracts
A fixed-term contract states a specific date when the employee’s employment will automatically come to an end. This form of contract is usually provided to employees who are hired to perform a specific task for a set period of time. Therefore, when this term expires, without renewal, the employment relationship ends and the principle of reasonable notice does not apply. However, most employment contracts are for an indefinite term, which will continue until the contract is terminated by either the employer or the employee.
Sometimes, fixed-term contracts can evolve into indefinite term contracts. For instance, in Ceccol v. Ontario Gymnastic Federation, an administrative director worked for the same employer for fifteen consecutive years, under a series of renewed one-year contracts with nearly identical terms. At trial, the court found that the successive fixed-term contracts created an expectation that the employee would continue to have a job and therefore, the court awarded her damages as if she had been employed on an indefinite basis.
Termination Provisions
Employers and employees can agree to almost anything in an employment contract. Frequently, there are agreements about the amount of severance or reasonable notice that must be provided in the event of dismissal. In other words, the parties agree to displace the employee’s entitlement to reasonable notice by specifying some other amount directly in the employment contract. These agreements are referred to as “termination provisions.”
Where termination provisions only provide the employee with an amount consistent with his or her statutory minimum payments, under the applicable provincial or federal legislation, the clause is said to be punitive. In this case, it would have to meet a number of tests to ensure that it is reasonable, should the employee challenge it. I’ve written about these conditions in more detail here but generally, termination provisions may not be enforceable where the term (a) is signed under duress; (b) is imposed on the employee without proper bargaining; (c) is inconsistent with legislation; (d) is ambiguous or too vague to properly interpret; and (e) the result of applying the clause would be grossly unfair.
In other cases, termination provisions may have been drafted to provide the employee with a benefit. This type of agreement usually occurs in the case of senior or executive level employees.
Probationary Periods
It is common for new employees to be asked to work for a probationary period, usually lasting three to six months, where their skills are tested before being given permanent employment. A probationary period must be expressly agreed upon by both parties, and cannot be implied. As well, because probationary periods reduce an employee’s common law rights, they must be properly drafted in order to be enforceable or to limit an employee’s right to reasonable notice in the event of dismissal.
If you have been dismissed without cause and your ex-employer is relying on the terms of your employment contract in paying you severance, you should meet with an employment lawyer who will advise you whether or not the contract is enforceable and what you can expect should it be overturned.
Read our employment law articles about employment contracts for more information.