The Impact Of A Fixed-Term Contract On Termination Of Employment

Posted May 19, 2023 by

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A recent Alberta Court of Appeal decision provides welcome guidance on fixed-term employment contracts. Fixed-term employment contracts can be challenging to interpret if they are not drafted in clear and precise language. A question that often arises is what exactly was intended – is it that the employee can be terminated prior to the expiry of the term or is it that termination during the term is restricted to just cause?

The employee in this case, a professional accountant, was given an offer of employment that stated that her first day on payroll would be April 1, 2016 and the assignment length would be 4 years. There was no provision in the offer dealing with termination of the employment. Nothing further in terms of a contract or other terms were provided to the employee. The trial judge noted that the entire case turned on the phrase in the contract that stated: “Your Assignment Length will be 4 years”. The employee’s employment was terminated before the end of the 4 year assignment, and the employee advanced a claim against the employer for wrongful dismissal.

The employee argued that this phrase meant that she would be employed for four years and at the end of that term, this particular job would cease. The employer argued a different interpretation, namely that this phrase meant that the employee could not apply internally for another job at Shell for four years unless special permission was granted. The trial judge found that it was clear the employee had been promised four years of employment, absent termination for cause. After four years, the contract would not automatically terminate, rather it would continue on but be terminable in accordance with general common law principles of notice at that point.

The employer appealed, arguing that the finding of a minimum fixed-term employment should be overturned. It argued that the employee be given 15 months’ notice instead of a payout to the end of the four years remaining on the contract (34.5 months).

The Alberta Court of Appeal dismissed the appeal. The Court of Appeal focused on the fact there was no termination clause in the offer letter. Therefore, the employee could not have agreed to be terminated on reasonable notice prior to the end of the four years. Likewise, it could not be inferred that the employer reserved the right to terminate the respondent on reasonable notice prior to the end of the assignment. The employee was awarded the remaining months left on the four year term.

The Alberta Court of Appeal made some additional comments on the issues in this case as follows:

  • Employment law contracts are interpreted in a manner that furthers employment law principles. One such principle is that clear language is required to create a fixed-term employment contract.
  • The presumption that an employment contract provides for termination without cause with reasonable notice is a presumption which can be rebutted if the contract is clear that this effect is intended.
  • In the within case, there were no termination provisions in the contract. There was evidence to rebut the presumption of indefinite employment as this was a project-based employment role and its duration corresponded to services required for a specific project.
  • The factual matrix surrounding the contract supported the employee’s position that she was hired for the fixed term of four years. “Your Assignment Length will be: 4 years” was held to not be ambiguous.
  • Interestingly, the appellant employer argued that the result of the trial judge meant that the employer could terminate other fixed-term employees with similar contracts right before the term was set to expire and not pay any reasonable notice. The Court of Appeal responded by stating it would not entertain hypothetical situations in this situation.

Fixed-term employment contracts remain a challenging 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 obtained the proper reasonable notice owned to you.

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