What should employers include in a fixed-term employment contract?

What should employers include in a fixed-term employment contract?

Many employees are hired by employers who anticipate a working relationship that is “indefinite” where there is no scheduled termination date. These employees sign their Employment Agreements with no anticipation of their work relationship ending with their employer – they could even choose to build their entire career with the hiring company.

However, employees can also be offered a fixed-term contract. In this case, employees will have a termination date scheduled, and will know the exact date of when their employment duties will end.

As an employer, you may be wondering how this distinction could affect the composition of the Employment Agreement?

When hiring an employee on a fixed-term basis, there are certain aspects of the employee-employer relationship that must be defined. As stated, the employee’s termination date will be outlined, but their projects are also expected to be completed by the end of that period. Once their contract has ended, and if the employer decides not to renew that contract, the employer-employee relationship will be completely severed, including the completion of certain tasks or projects. The contract should include the title of their temporary occupation, a description of the role that is relatively broad so there is room for the position to modify and adapt if needed, and how much and how frequently the employee will be paid during this time. The contract will also provide expectations for the employee including the jobs that require service, the level of skill required for completion, and clearly defined impermanence of the role.

How does the impermanence of the role need to be outlined in the contract? This is the critical aspect of the contract because it is the major difference between a fixed-term contract and an indefinite term contract.

In the fixed-term contract an employer must include the exact start and termination date, and the number of hours they are expected to work during that period. The contract should also incorporate an early termination clause outlining the procedure that will follow if the contract is required to end early. Just because the termination date is scheduled, doesn’t mean the employer is not legally able to terminate the contract early if expectations are not met. The employer’s job in this case is to make this process as clear as possible to the employee within the terms of the contract.

There is also the option to create a contract that automatically renews once the fixed-term period has ended. If the employer decides to have this automatic renewal, the employer should define how they will terminate if they choose to do so. This type of contract could become risky for the employer because if they miss the opportunity to terminate the employee, the employee will begin their next contractual period. It could create issues with the employee because they could be planning their income and career based on their current contractual schedule, and without receiving any termination notice prior to the renewal of their contract, they could become an indefinite contract which could lead to liability issues for the employer.

If you are an employer who wants to create fixed-term employment contracts which limits your liability to the employee, 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.