Damages Owed Under Fixed Term Contracts

Nov 28, 2017

In my last blog post, I discussed a case where an independent contractor who signed a fixed term contract was owed notice of termination, specifically, 5 months and 3 weeks. There are very important differences between indefinite and fixed term contracts, particularly at the time of termination. In this week’s blog post, I’ll delve deeper into how damages are calculated when you are subject to a fixed term contract.

Mohamed v Information Systems Architects Inc.

Facts

Mr. Mohamed was hired as an independent contractor for Information Systems Architects Inc. (ISA) to provide technological services for their client, Canadian Tire, for a 2 month project. After signing a consulting agreement, he began to perform computer security services for Canadian Tire.

Around this time, Canadian Tire retained ISA for a second project which required a security engineer to temporarily fill a position for six months. ISA offered the project to Mr. Mohamed, which he accepted by signing a second consulting agreement.

Due to the results of Mr. Mohamed’s security background check, which disclosed a past conviction, Canadian Tire asked ISA to replace Mr. Mohamed. ISA terminated Mr. Mohamed, relying on the termination clauses found in the consulting agreement.

Decision

The court moved on to note that nothing turned on whether Mr. Mohamed was an independent or dependent contractor. Whether Mr. Mohamed was an employee, a dependent contractor, or an independent contractor would have been relevant if the employment contract was of indefinite duration, i.e. one in which a person is entitled to reasonable notice of termination unless the parties have contracted otherwise.

With a fixed term contract, such as the one Mr. Mohamed signed, if the parties do not specify a pre-determined notice period, then the early-terminated employee is entitled to the compensation they would have received until the end of the fixed term. As I discussed in my last blog post, the court found that the termination clauses were unenforceable. Therefore, Mr. Mohamed was entitled to damages equivalent to 5 months and 3 weeks of the remaining contract.

Lessons to be Learned

Although independent contractors don’t enjoy protections under the Employment Standards Act, notice of termination may still be required. If you were characterised as an independent contractor and were terminated without notice, it is still advisable to speak to an employment lawyer to ensure that a) you are in fact an independent contractor, and b) you are not owed notice of termination, particularly if you signed a fixed term contract. 

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

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