Fixed-term Contracts: What Happens When They End?

 In a recent decision, an employee attempted to prove that he had a five-year fixed term contract with his employer.  While the court ultimately found that he did not, the decision highlights the important differences between indefinite and fixed-term contracts. These differences are especially significant to you as an employee if you are terminated.

Indefinite Contracts

In a typical contract, the term of employment is indefinite – there is no end-date to your employment.  If the employment contract does not contain an enforceable termination clause, then you are entitled to reasonable notice of termination or pay in lieu of notice if your employer terminates your employment. How much notice you are entitled to depends on, among other things, your age, position, education and experience, and length of service with the company.  Trial judges rarely find a notice period more than 24 months.

Fixed-term Contracts

 A fixed-term contract states that an individual will be employed for a specified period of time – such as one year.  These contracts are common when employees are filling maternity leaves, time limited projects, and/or for government funded positions.  The difference between a fixed-term contract and an indefinite contract at the time of termination is significant. An employee with a fixed-term contract should be paid the entirety of what she would have received under the contract, should the employment end early.

Take the case mentioned above as an example.  The employee argued that he had a five year fixed-term contract.  He was terminated after eight months. If the court had found that he did have a fixed-term contract, he would have been entitled to damages in the amount of four years and four months of wages.

As another example, if an employee is filling a maternity leave and has a fixed-term contract for one year, and that employee is terminated after two months, she is entitled to payment of the remaining wages on the contract – ten months in this example.

 If there is a termination clause in an employment contract that will usually set how much notice an employee should receive.  This is true whether it is an indefinite or fixed-term contract.  Keep in mind that termination clauses can be attacked whether they are found in indefinite or fixed-term contracts. For more information on termination clauses, see here.

If you have lost your job and would like to know whether you are entitled to additional termination pay, please contact us at [email protected] or 1-888-640-1728 (toll free) or 647-204-8107 (within the GTA).