27 Oct Does Your Workplace Have Fixed-term Employment Contracts?
Since the decisions in Bowes in 2012 and Howard in 2016, Ontario courts have been clear: if an employee is dismissed early from a fixed-term contract and there is no enforceable termination clause, the employer must pay the employee the balance of the contract without any deduction for mitigation. In other words, the employee does not have to look for new work, and even if they do and earn income, that income does not reduce the employer’s liability.
The rationale behind this rule is that the parties chose to define the term of employment with a clear end date, and without a termination clause allowing for early exit, the employer must live with that choice.
For example, an employee in Ontario on a two-year contract who is dismissed after two months will be entitled to payment of the remaining 22 months of their contract, unless the contract contains an enforceable termination clause. This would apply even if they obtained new employment after only a few months.
It is important to note that this rule applies only in the context of an employment relationship, and in normal circumstances it does not apply in the case of an independent contractor relationship.
However, a recent decision from the B.C. Court of Appeal Mac’s Convenience Stores Inc. v. Basyal held that the employee does have a duty to mitigate their loss, which means all earnings they may earn during the remaining 22 months will be deducted from what their employer would owe to them for the remaining 22 months. This is a real departure from the law as it currently exists in Ontario. It likely will be appealed to the Supreme Court of Canada. If you are an employer or an employee with a “fixed-term” employment agreement you really should seek legal advice and ensure your contract meets your needs.
Please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.