Canadian Employment Law Today

October 29, 2014

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

Issue link:

Contents of this Issue


Page 1 of 7

with Tim Mitchell Ask an Expert NortoN roSe FulBriGHt CALGARY Have a question for our experts? Email Canadian HR Reporter, a Thomson Reuters business 2014 2 | October 1, 2014 Ask an Expert Have a question for our experts? Email 2 | October 29, 2014 Answer: e law relating to fi xed-term contracts is reasonably straightforward in its expression but is often less so in its ap- plication. Under the orthodox view (and sub- ject always to any contrary provisions in the contract itself ), the expiry of the fi xed term discharges the contract. Neither party would have an obligation to renew or a right to claim renewal. If the parties entered into one or more subsequent fi xed-term con- tracts, even on identical terms, each succes- sive contract would also expire at the end of its term with the same consequences. As an employer under such an arrangement would have no obligation to off er any contract, the contractor faced with an off er to renew for a shorter term would have no cause for com- plaint. e contractor could accept or reject the off er but could not successfully object to it as a breach of contract. at said, there are a number of cases in which a succession of fi xed-term contracts has been used to avoid creating an employ- ment relationship of indefi nite duration and thus to avoid the provision of reasonable notice that is usually required in such cases. e Supreme Court of Canada has repeat- edly emphasized the importance of work to employees. e courts have responded by putting fi xed-term contracts under se- vere scrutiny and by giving eff ect to the substance of the relationship over its form wherever possible. e leading authority on this issue is the Ontario Court of Appeal decision in Cec- col v. Ontario Gymnastic Federation. In that case, a senior employee was employed under 15 annual fi xed-term contracts. e employer gave the employee minimal notice of her termination, claiming it had no obli- gation to provide any notice of termination because the contract was simply not being renewed. Both the trial judge and the Court of Appeal rejected the employer's charac- terization of the relationship. It was held that the employment relation- ship was not, in reality, a series of fi xed-term contracts but was employment for an in- defi nite term; as such, reasonable notice of its termination was required. e facts that were considered signifi cant by both the trial judge and the Court of Appeal in reaching this conclusion were: the understanding of both the employee and her supervisors that the employee was a permanent employee; the assignment to the employee of multi- year projects; the employer's off er to her of an opportunity to join its pension plan; the employer's subsidization of multi-year edu- cation courses for the employee with long- term goals in mind; performance appraisals describing the employee as 'full-time'; and the execution of the annual contracts both before and after the nominal expiry dates. e Court of Appeal also noted the exis- tence of a provision that indicated the agree- ment was "subject to renewal," "subject to acceptable performance reviews" and other provisions that suggested the possibility that renewal was not optional. Ambiguity in the contractual terms was to be interpreted in the employee's favour, given the serious consequences of a fi nding that the contract was for a fi xed term. e Court of Appeal agreed with the statement of the trial judge that "in the fi - nal analysis, in these cases the decision to be made is what are the reasonable expecta- tions of the parties. Overall, the employer's conduct throughout the years had given the employee a reasonable expectation that the term and notice provision in the standard form contract used did not apply to her." Similar arrangements have resulted in similar conclusions in subsequent cases. In Monjushko v. Century College Ltd., the plaintiff was a college instructor who had worked for a college under a series of ap- pointments setting out the courses he was to teach in the upcoming semester and the amount of his compensation. e court held that the employer's conduct was in- consistent with its characterization of the appointments as successive fi xed-term contracts. In particular, the employer had issued only a single record of employment indicating a start date in 1996 and a last day of work in 2005. It was found that the em- ployee had been continuously employed and was entitled to reasonable notice of the termination of his employment. Two recent cases from Quebec have ap- plied like principles with similar results. In Quebec (Commission des normes du tra- vail c. IEC Holden inc.), the variable nature of orders to be fi lled in the employer's business led it to hire its workforce to meet needs as and when they arose and under short-term contracts. Many of the employees worked continuously, when one order followed on the heels of another. e employer declined to renew a number of the contracts when orders declined, without off ering the af- fected employees any termination pay. e Quebec Court of Appeal considered the employer's failure to advise the employees of the fi xed-term nature of their contracts at the time of hire; the lack of attention paid to the execution of successive contracts; the absence of interruption in employment in most cases; the off er of benefi ts to the em- ployees; and the expectation of the parties that one contract would follow upon the ex- piry of the previous one in reaching its con- clusion that relationships of indeterminate employment existed on the facts. In Atwater Badminton and Squash Club Inc. c. Morgan, a relationship of 17 years between a badminton club and its pro, with little change in working conditions, no real consideration of non-renewal of successive contracts of varying lengths, an informal ar- rangement for renewal of the contracts and a period of employment with no contract at all were strong indicators of its true legal na- ture as indefi nate employment. Despite these and similar cases, it is cer- tainly possible to establish a fi xed-term em- ployment contract that expires without fur- ther obligations on either party at the end of its term and a number of cases have upheld such contracts according to their terms. In Flynn v. Shorcan Brokers Ltd., the con- tractor was advised and was fully aware of the nature of the contract; the parties were sophisticated and equal in bargaining pow- er; each fi xed-term contract was negotiable when it was made; the opportunity to obtain legal advice was made available, although the contractor chose to forego it; the con- tract's terms were comprehensive, clear and ambiguous on the issue of termination and did not contemplate renewal; and no verbal representations had been made that could be considered to have given the contrac- tor the reasonable expectation that he was a full-time permanent employee. e con- tractor was not entitled to claim anything further from the employer when the third annual contract expired and negotiations for a new agreement were unsuccessful. In Jacks v. Victoria Amateur Swimming Club, the court noted that there was no am- biguity in the termination provisions; the contractor had access to legal advice; and a prior off er of a contract of 2 years' dura- tion, as opposed to the earlier 4-year fi xed terms, had been a matter of contention be- Renewing contracts for shorter terms Question: If a contractor has had a short-term contract renewed several times (such as for one year each), are there any legal concerns with the employer renewing the contract for a shorter term than all the previous contracts? reNeWiNG CoNtrACtS on page 7ยป Fixed-term contracts face scrutiny giving effect to the substance of the relationship over its form whenever possible.

Articles in this issue

Archives of this issue

view archives of Canadian Employment Law Today - October 29, 2014