Canadian HR Reporter

CANADIAN HR REPORTER CANADIAN HR REPORTER March 10, 2014 March 10, 2014 INSIGHT INSIGHT 15 15 Ensuring termination clauses Ensuring termination clauses remain valid in fi xed employment contracts remain valid in fi xed employment contracts QUESTION: If a one-year, fi xed-term employment contract with a specifi ed end date and a termination clause is re- newed annually without any changes, does the termination clause remain valid? ANSWER: Under common law, an employment contract is pre- sumed to be of indefi nite dura- tion and subject to an implied term requiring the employer to give reasonable notice if it wants to dismiss the employee without cause. However, the parties to an em- ployment relationship can create a written contract that contains diff erent provisions. For example, an employer and employee can agree to an express termination clause in the employment con- tract, as long as the clause meets or exceeds the employee's termi- nation entitlement under the ap- plicable employment standards legislation. e law also permits an em- ployer and employee to enter into a fi xed-term employment con- tract with a specifi c beginning and end date. Where this happens, the usual principle is that the em- ployee's employment will end on the expiry date of the contract, and there is no requirement to give reasonable notice of termination. Employers must be careful in drafting employment contracts, however, because judges will of- ten refuse to enforce contracts that are ambiguous or outdated, that violate employment stan- dards minimums or do not refl ect the realities of the employment relationship between the parties. Particular care must be taken when fixed-term employment contracts are used. If an employee continues to work after the expiry date of a defi nite term contract, and no new contract is entered into, the employment relation- ship will become one of indefi nite duration, subject to termination with reasonable notice. Employers should be especially cautious when using a succession of fi xed-term employment con- tracts because a court may fi nd that, in substance, this refl ects an employment relationship with an indefi nite term. In Ceccol v. Ontario Gymnas- tic Federation, for example, the employee was employed by the organization as its administra- tive director for 16 years under a series of similar one-year employ- ment contracts that were subject to renewal based on an acceptable performance review. The Ontario Court of Ap- peal ruled that while fi xed-term contracts are legal, they must be drafted in clear and explicit lan- guage and any ambiguities will be interpreted against the employer's interests. e court stated partic- ular vigilance must be exercised when an employee works for sev- eral years under a series of fi xed- term contracts but the underly- ing reality of the employment relationship refl ects continuous service for many years, coupled with conduct on the part of the employer that sig- nals an indefi nite term employment relation- ship. The employee in Ceccol was found to be entitled to reasonable notice. While Ceccol has been applied in several subse- quent cases, some judges have distinguished it from cases where the employment agreement in question was drafted unambigu- ously. (See, for example, Flynn v. Shorcan Brokers Ltd. and Carr v. Atlantic Business College Ltd.) Employment standards legisla- tion may also aff ect the enforce- ability of successive fi xed-term employment contracts. Under section 65(1)(b) of the British Co- lumbia Employment Standards Act, for example, the act's termi- nation provisions do not apply where an employee is hired for a defi nite term. However, this section states that where such an employee con- tinues to be employed for at least three months after completing the term, the employment is deemed to be indefi nite and the employee is deemed to have started at the beginning of the term. The Employment Standards Tribunal has ruled that section 65(2) applies even where the parties have entered into a sub- sequent fi xed-term employment agreement. (See Fraser-Fort George Museum Society.) In many of these cases, the em- ployer could have avoided litiga- tion and liability by designing a written employment contract with an indefi nite term and a care- fully drafted termination clause. Colin Gibson is a partner at Harris and Company in Vancouver. He can be reached at (604) 891-2212 or cgib- son@harrisco.com. Colin Gibson Toughest HR Question A look at the growing skills gap A look at the growing skills gap and importance of employee mobility and importance of employee mobility The number of high-paying jobs sitting unfi lled because of a growing skills gap in Canada's labour pool is a real threat to the nation's economy. Since 2006, Canadian employers have created more than 1.6 mil- lion jobs — more than any other G7 country. Most of those have been full-time, private sector jobs requiring high skills and paying high wages. Yet Canada is facing a skills gap that spans many industries and regions. In the short term, key strategies to address this include providing employers with better access to skilled workers under the Temporary Foreign Worker Program (TFWP) and improving internal mobility, making it easier for Canadians to move to regions where jobs exist. Hiring qualifi ed Canadians is the fi rst choice for Canadian em- ployers. But the reality is those workers are not readily available. Research conducted by the Canadian Employee Relocation Council (CERC) in 2012 with Ip- sos Public Research found only two in 10 Canadians would be very likely to move to another city for employment. (In contrast, Ital- ians are twice as likely to move to another city for work.) is is before we consider the barriers between the provinces around certifi cation and skills rec- ognition that curtail the mobility of the Canadian workforce. In 2013, as part of a series of reforms to the TFWP, the federal government suspended the Ac- celerated Labour Market Opinion (ALMO) program. at program, which expedited the entry of tem- porary workers into Canada, had cut the amount of time it took to process a labour market opinion application from more than 14 weeks to fewer than 10 days. e suspension of the ALMO program in 2013 has pushed those processing times back to more than 14 weeks. In addition to very stringent requirements on employers to comply with the TFWP regula- tions, employers found to be in violation of the rules face fi nes, risk the possible imprisonment of executives and can be banned from the program and listed as in- eligible employers on Citizenship and Immigration Canada (CIC)'s website. No company was fi ned or listed on the CIC website in 2013, leav- ing employers to question what really lies behind the changes. In December 2013, in an eff ort to learn how suspension of the ALMO is impacting business op- erations, CERC conducted a sur- vey of employers that access the TFWP for high-skilled managers and professions. Since the program was suspended: •62 per cent say the changes have resulted in increased costs be- cause of the delays •55 per cent say the changes have caused project delays •more than one-third say the de- lays have resulted in lost business •just under one-third (30 per cent) have moved work outside of Canada. In addition, many companies say they have lost talent because employees looking to transfer into the country have been deterred by the lengthy delays and the subtle message they are unwelcome in Canada. Of equal concern are proposed changes to the rules governing in- tra-company transfers (ICTs). e ICT program allows companies to transfer employees — invariably, high-skilled employees, execu- tives and senior management — between operations that bring in- ternational leadership, innovation and global expertise to Canadian employers. e changes would redefi ne specialized knowledge workers and impose a minimum experience threshold. The changes would also run counter to the trade agreements Canada has with many of its trad- ing partners, including the United States and the newly inked deal with the European Union (EU). ere is a lot at risk and it is not clear why the government has tar- geted a program that delivers such a rich benefi t to our economy. e 2014 budget appeared to show some softening of the gov- ernment's position on temporary foreign workers with a proposal to provide employers with expedited access to a highly skilled stream. However, companies located in areas of high unemployment may not be able to participate in the program an d will have to follow the lengthier process. All of these changes come at a time when the federal govern- ment's own research suggests higher vacancy rates exist in skilled trades and science-based occupations. The government also notes proportionally fewer Canadians graduate with a uni- versity degree in high-demand fi elds such as science, technology, engineering and mathematics. And, according to the Canadian government, it appears Canada lags behind its peers in business operations. e U.S. and the EU have their own skills mismatch to contend with. In the U.S., the unemploy- ment rate among people without a high school diploma is triple the rate of people with a bachelor's degree or higher. In the EU, some 24 million people are unemployed — yet six million jobs cannot be fi lled because of a lack of qualifi ed workers. Research conducted by con- sulting fi rm McKinsey & Com- pany estimates employers face a major shortage of highly skilled workers on a global scale of 38 to 41 million skilled workers, with one in 10 jobs going unfi lled by 2020. In that same 2012 report, it is estimated there will be a sur- plus of 90 to 95 million low-skilled workers — or 10 per cent of the supply. The global skills shortage is raising concerns among leading think-tanks and research insti- tutions around the world. The World Economic Forum has been taking a close interest in the mat- ter, releasing in a series of reports including the landmark Stimulat- ing Economies through Fostering Talent Mobility, which highlights the importance of talent mobility to a dynamic economy. is is not just an issue about temporary workers in Canada — it's also about building a skilled workforce to compete. It is time for a comprehensive review of all aspects of Canada's immigration programs and future labour force growth. Canada must develop a model of economic immigration that supports economic growth and labour force needs. At the same time, work must begin immedi- ately to focus more resources on transitioning a greater number of temporary workers into perma- nent residents. Steps must also be taken to im- prove mobility for all Canadians to work and practise their trade or profession wherever they wish to do so. is must also include changes to current tax regulations that will support greater employee mobility from regions with high unemployment to those regions with abundant job opportunities. It is time for full mobility in Can- ada across all occupations. All of these measures will go a long way in helping to ensure employers have the skills needed to compete at home and on the global stage. Stephen Cryne is president of the Toronto-based Canadian Employee Relocation Council (CERC). For more information, visit www.cerc.ca. Stephen Cryne Guest Commentary A court may fi nd that, in substance, this refl ects an employment relationship with an indefi nite term.

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