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What happens at the end of a fixed term contract?

By Matt Lalande in Employment Contracts on July 05, 2020

What happens at the end of a fixed term contract?

An indefinite term employment contract is an open-ended employment relationship with no fixed end point – which is the contract used for most jobs. Your employer hires you, you sign a contract and the employment relationship lasts until the employer terminates the employment, until you resign, or the contract can no longer be performed due to frustration.

A “fixed-term contract” (sometimes called a “limited-term” contract or “temporary employment”), is an employment relationship that ends on a fixed date agreed to by the parties, without the need for one party to terminate the contract. Employees who are employed under a fixed-term contract are sometimes referred to in layman’s terms as “contract” or “temporary” employees. Unless there is a contractual term to the contrary, neither party is required to provide notice to the other of the end of a fixed-term contract since the employment relationship naturally comes to an end at either a specified calendar date or upon the completion of a specified task or project.ย  many seasonal workers, such as pool companies, landscapers or specific employees hired for events or festivals, amusement parks, or to assist with seasonal events are often hired on fixed term agreements.

What happens if the employee is fired prior to the end of the fixed term contract?

Normally under a fixed-term contract, if the employer terminates the employee without just cause before the agreed upon expiry date, the employer must provide the employee with the compensation that would have earned had the employee continued to work to the end of the term. This amount might be small or very large, depending on the length of that remaining period. Courts are divided on whether this compensation is subject to an employee’s duty to mitigate.

Depending upon the time remaining under the fixed-term contract, this liability could be significantly greater/less than what the employee would have received as common law reasonable notice under an indefinite term employment contract. To avoid this potentially large termination liability, the parties may agree to a contractual amount of notice of termination, or pay in lieu of notice, so long as that notice or pay in lieu is not less than the minimum notice the employee is entitled to under minimum standards legislation.

What are the risk of fixed term contracts?

With fixed term contracts, and in common law jurisdictions, if the employee works for only a single day beyond the term agreed to in the fixed-term contract, a court may find that the employment relationship continues under the terms of the original contract but subject to an indefinite term, rather than a fixed duration. The employee will then be entitled to common law reasonable notice of termination if he is terminated without just cause.

Can my employer avoid liability if they fire me before the end of my fixed-term contract?

For your employer to avoid the potential for a very large damages award, you must have signed a fixed-term employment contract which contained a termination clause which granted your employer the right to terminate the employment relationship without cause, prior to the end of the fixed term. The without cause termination clause should have the following issues in mind:

  • Statutory notice of termination;
  • Length of the contract;
  • Possible conversion to indefinite term employment.
  • Mitigation.

Without such a provision, it is unlikely that your employer will be able to succeed with a reasonable defence.

Have you been terminated on a fixed term agreement?

If you have a question about fixed term contracts or you have been terminated prior to the end ofย  your agreement, call us toll free at 1-844-LALANDE or email us through our contact form page today. We have been representing employees and employers since 2003 and we would be happy to help assist with any questions or concerns you may have.

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