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Fixed-term contracts in Alberta can be complex, especially when the language isn’t clear. A recent decision by the Alberta Court of Appeal offers helpful guidance on how these contracts should be interpreted.
This case underscores the importance of understanding what a fixed-term contract truly means and how courts address disputes related to termination during the contract period.
What Is a Fixed-Term Contract?
A fixed-term contract is an employment agreement that specifies both a start and an end date. Unlike indefinite contracts, it automatically ends unless renewed.
Interpreting fixed-term contracts can be tricky if the language isn’t clear. One common question is: What was the intent behind the contract? Specifically, does it allow for termination before the end date, or does it mean the employee can only be terminated for cause during the contract term?
Key Case: Four-Year Fixed-Term Contract Ruling in Alberta
A professional accountant was offered employment with a start date of April 1, 2016, and a term of four years. The offer letter stated “Your assignment length will be 4 years,” and did not include any other terms or details regarding termination.
The employee was terminated before the four-year term ended. She argued that the phrasing in the employment offer meant that she would be employed for four years and her employment would end when that term was complete. As a result, the employee filed a claim against the employer for wrongful dismissal.
The employer argued that the phrase meant the employee could not apply for another internal job at the company for four years unless special permission was granted.
Trial Decision
The trial judge concluded that the employee had been promised four years of employment, allowing only termination for cause. Interestingly, the judge found that after the four-year term, the contract wouldn’t automatically end. Instead, it would continue unless either party decided to terminate it following common law principles and providing proper notice.
The employer appealed the decision, seeking to overturn the finding that the offer was a fixed-term employment agreement. The employer argued that instead of paying out the remaining 34.5 months of the contract, the employee should only be entitled to 15 months’ notice.
The Alberta Court of Appeal dismissed the employer’s appeal. The Court emphasized that there was no termination clause in the offer letter, meaning the employee could not have agreed to be terminated with reasonable notice before the end of the four years. Additionally, the employer could not infer the right to terminate the employee early under reasonable notice.
As a result, the employee was awarded compensation for the remaining months of the four-year term.
Key Legal Takeaways From This Case
This case provides several important lessons about fixed-term contracts:
The Importance of Clear Language
A fixed-term employment contract must be written clearly, in line with employment law principles. Ambiguity can lead to confusion and legal disputes, as seen in this case.
Presumption of Termination Without Cause
Generally, employment contracts assume that employees can be terminated without cause, but with reasonable notice. However, this assumption can be changed if the contract clearly states otherwise.
Fixed Term vs. Indefinite Employment
Employment contracts should include termination provisions. As this case illustrates, there was evidence to demonstrate that the employment was project-based and its duration would be tied to the completion of those services, however that was not clear enough to demonstrate the employment was fixed term.
Factual Context Behind the Fixed-Term Contract
The facts surrounding the contract strongly supported the employee’s claim that she was hired for a fixed-term role of four years. The phrase “Your Assignment Length will be 4 years” was considered clear and not open to different interpretations.
Court’s Response to Hypothetical Scenarios
The employer raised a concern that this ruling would allow them to terminate other employees with similar fixed-term contracts just before the term ended, without providing notice. The Court of Appeal rejected this argument, stating that it would not speculate on hypothetical scenarios in this case.
When to Seek Legal Advice for Fixed-Term Contracts
Fixed-term employment contracts are a complex area of employment law. If you have been terminated on what you believe may be a fixed-term employment contract, contact Cashion Legal to discuss whether you have received proper reasonable notice owed to you.
FAQs on Fixed-Term Contracts in Alberta
What is a fixed-term contract?
A fixed-term contract is an employment agreement that specifies a start date and an end date. The contract automatically expires at the end of the term unless it is renewed or extended.
Can a fixed-term contract be terminated early?
Yes, a fixed-term contract can be terminated early, but only for specific reasons, such as misconduct or other just cause. If terminated early without cause, the employer may be required to pay damages or provide notice, depending on the terms of the contract.
What happens if a fixed-term contract is renewed multiple times?
If a fixed-fixed term contract is repeatedly renewed, it may eventually be considered an indefinite contract. This depends on the circumstances, such as the length of time and the nature of the renewals. In some cases, continuous renewals may suggest a long-term, ongoing employment relationship.