Fixed Term Employment Contracts Still A Bad Idea

Jan 11, 2017

We’ve written before on how fixed term employment contracts are not a good idea. A recent decision from the Ontario Superior Court of Justice confirms the law on this point so far, and serves as yet another lesson to employers considering offering such a contract to temporary employees.

Ballim v Bausch & Lomb Canada Inc.

In October 2015, Ms. Menezes spoke to Ms. Ballim about possible employment with Bausch & Lomb (“the Company”) to replace her as she was going on maternity leave. Ms. Ballim was interested in the opportunity and attended two interviews, the latter being with Mr. Moniz.

In November 2015, Mr. Moniz sent an email to Ms. Ballim with the subject matter “Offer.” The email stated it was a one-year contract, and attached an employment agreement that Ms. Ballim was to sign.

The employment agreement provided that Ms. Ballim’s employment was on a contract basis, that her employment would be commencing on November 18, 2015 and that she would receive payment of $2,230.77 bi-weekly in 26 installments equating to an annual base salary of $58,000. Ms. Ballim executed the employment agreement and began work immediately.

Approximately one month after commencing her employment, Ms. Ballim asked for an unpaid leave of absence to travel to South Africa on compassionate grounds. Ms. Ballim’s request was approved, she was to return to work on February 18, 2016 at the latest. In reality, Ms. Ballim did not return until February 22, 2016. Upon her return, Ms. Ballim was informed that her employment was being terminated.

Because Ms. Ballim had been employed for three months, the Company took the position that she was only entitled to one week notice of termination under the Employment Standards Act. On a gratuitous basis, it provided her with an additional week.

Ms. Ballim obtained new employment in May 2016 and earned a salary of $72,000.

Ms. Ballim brought a motion for summary judgment arguing that she had a fixed term contract of one year. If she was successful, she would be entitled to recover all damages for the unexpired term of the contract. The Company argued that the plaintiff was hired for an indefinite term and that as such, she was only entitled to reasonable notice.

Was the Contract a Fixed Term Contract?

The judge found that the offer to Ms. Ballim consisted of both the email and employment agreement. This finding was important as it was the email that stated it was a one-year contract, not the employment agreement. The Company tried to argue that the contract was for an indefinite term as Ms. Menezes could have returned to work at any point in time.

The judge disagreed: the contract had a start date; Ms. Ballim was to be paid every two weeks in 26 installments, which was consistent with the accompanying email that expressly provided for a one-year duration. Although no precise end date was specified, it could be easily inferred to be one year from November 18, 2015.

Given this finding, the Company was required to pay Ms. Ballim to the end of the term. As per the Ontario Court of Appeal decision of Howard v Benson, these damages were not subject to mitigation. Therefore, she was entitled to damages from the breach of contract for the balance of 38.5 weeks.

Lessons to be Learned

  1. It is generally a bad idea to ask an employee to enter into a fixed term contract.
  2. If a fixed term contract must be used, it must include an (enforceable) early termination clause.
  3. The termination clause should also require the employee to mitigate their damages if the contract is terminated early.

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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