I do not like fixed-term contracts. In my experience, a contract of indefinite employment with a termination clause is a better option for an employer in almost every situation.

This blog summarizes a recent case which reinforces my negative views on fixed-term contracts.

The Facts

The employer entered into a one year fixed term contract with a senior manager. There was no obligation to renew the contract. If however the employer terminated the contract before the end of the term then the employee was entitled to 12 months pay.

About a month before the contract was to expire the employer decided not to renew the contract and sent the employee home with full pay until the end of the contract.

The Decision

The Alberta Court of Appeal upheld the trial judge’s conclusion that the employee had been constructively dismissed because he was not permitted to continue his employment and he was not permitted to come into the office. In particular: “When no attempt is made by an employer to obtain an employee’s consent to early termination of a fixed-term contract, the employer risks a finding of termination.”

Because he was constructively terminated before the end of the fixed-term contract the employer was ordered to pay the employee 12 months pay.

Lessons to Be Learned:

1. The courts will read contractual language strictly against an employer.

2. Sending an employee home with full pay can constitute constructive dismissal in some cases.

3. Call an employment lawyer before changing any terms of employment.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers and employees on all aspects of the employment relationship including employment contracts. If you have any questions, you can contact him at 416 317-9894 or at [email protected]