Terminated Contract Employee Receives Three Years’ Pay from Prior Employer

Sep 6, 2016

In many cases, employers must provide terminated employees written notice of termination or pay instead of notice. How much notice or pay may depend on the type of employment contract. In some cases, a “contract employee” or those with a “fixed-term contract” may be entitled to extensive damages if they are terminated before the end of the contract.

What is a Fixed-Term Contract?

A fixed-term contract of employment is one where the employer and employee agree on an end date of employment. Jobs commonly referred to as “contract positions” are examples of a fixed-term contract. Because there is an end date, no notice of termination is required when the contract ends. However, what happens when an employer terminates an employee early under a fixed-term contract? In a recent Court of Appeal decision, the court awarded the employee all of the wages that he would have earned for the remainder of his contract.

The Case: Howard v. Benson Group Inc.

The employee, Mr. Howard, agreed to a fixed-term contract of five years with his employer. After almost two years, the employer terminated Mr. Howard without cause. The employer only gave Mr. Howard two weeks termination pay.

Even though the contract stated how much Mr. Howard would receive if terminated early, the court decided that this part of the contract was not valid. The court then concluded that because it was a fixed-term contract, the proper notice that Mr. Howard was owed was the remainder of his contract.

The Court also found that Mr. Howard did not have to mitigate his losses. As we have written before, terminated employees normally must take reasonable steps to look for a new job. Any earnings may be deducted from what the terminated employee receives. For Mr. Howard, he did not have this legal obligation and he received the full three years’ wages.

Lessons

If you are a “contract employee” or have a “fixed-term contract” and you are terminated early, you may be owed a significant amount of notice or pay from your employer. In Mr. Howard’s case, he received almost three years of his wages rather than two weeks’ pay.

Many employers do not draft proper termination provisions. Whether your contract is fixed or indefinite, it is always helpful to consult an employment lawyer to determine whether your termination provision is enforceable when you are terminated.

If you would like to speak with an experienced lawyer at MacLeod Law Firm about this issue, please contact us at [email protected] or 647-204-8107.

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