by Or Regev
Securing a new job is an exciting milestone, particularly when Vancouver’s soaring living costs make you toss and turn at night. It may be so exciting that you forgot to give that employment contract you signed a second thought, or perhaps you weren’t really sure what to look for in the first place.
The reality is, for one reason or another, most employment relationships come to an end eventually, and that contract you signed can be a very important piece of evidence in case you are terminated without cause. Additionally, the surrounding circumstances that led to your employment may also be important in case a dispute arises down the road. This is especially so if you did not sign a written employment contract and only have an oral agreement, which is never prudent. If you have been terminated without cause, you will want to pay particular attention to whether your employment was indefinite or for a fixed term.
An indefinite employment contract is one in which the parties continue to work together until one of them exits the relationship, either through resignation, (valid) termination or retirement. These contracts do not have a specific date or timeline as to when the relationship ends. This is the most common type of employment relationship. On the other hand, a fixed term contract gives rise to employment for a specific period of time. This is common where an individual is hired for seasonal work, such as a camp counsellor, or to cover an existing employee’s position when they take a leave of absence. You may be wondering, why is the distinction between indefinite and fixed term contracts so important?
The short answer is, it can affect how much money you are entitled to if you are terminated without cause. If your contract is indefinite and does not contain termination notice provisions, or ones that are reasonable, there is a common law presumption that your contract includes an implied term that your employer must provide reasonable notice to you prior to your termination, or payment in lieu of notice. If your employer does not provide you with reasonable notice, or payment in lieu, you will be entitled to damages. Moreover, courts have held that employers cannot forego their common law obligations to provide notice or payment in lieu by continuously rehiring an employee on a fixed-term basis; if this is the case, the employment can be considered indefinite.
The situation is a bit different with a fixed term contract. If your contract is for a fixed term, your employment is already deemed to terminate at some end date, so your employer is not obligated to give you reasonable notice prior to that date. For example, if your contract is from May 1 to September 1, your employer does not have to advise you in August that your contract is about to end.
However, if you are terminated without cause prior to the end of your fixed term, you are entitled to the wages you would have received until the end of your contract, assuming your contract does not contain a clause that provides for a fixed term of notice or payment in lieu. Drawing on the above example, if your contract is from May 1 to September 1 and you are paid $1000 monthly, if your employer terminates the contract at the end of June, you are entitled to $2000; these are your wages for the months of July and August. This can end up being substantially more money than you would receive in damages for breach of an indefinite contract, depending on length of employment and timing of termination. You may also be entitled to loss benefits, bonuses, etc.
All of the above is relatively straightforward, but we are assuming that your employment contract is clear as to whether it is indefinite or for a fixed term. This is where the analysis becomes more interesting and complex. Employment contracts often contain ambiguous or contradictory terms which make it difficult to discern whether the contract is indefinite or for a fixed term. Consider the recent case of Alsip v Top Rollshutters Inc. doing business as Talius¸2015 BCSC 1166, affirmed on appeal.
In Talius, the Plaintiff was dismissed without cause and brought an action for wrongful dismissal and breach of contract. The employment contract stated that the Plaintiff’s position was ‘full time and permanent’ but seemed to contradict itself by also including language noting a ‘3 year contract’. Surely a contract cannot be both permanent (indefinite) and for a three year term (fixed term). The contract contained no termination provisions.
The Plaintiff, the terminated employee, argued that the contract was for a fixed three year term, so he sought payment for the balance of his contractual term. The Defendant employer took the position that the contract was for a ‘maximum of three years’ with the ability to terminate for cause or with reasonable notice or pay in lieu of notice.
In undergoing his analysis, Justice Betton noted there was no evidence of any discussions that clarified, altered or added terms to the contract. He went on to discuss interpretive principles such as if there is an ambiguity in a contract, a review of the surrounding circumstances can assist with interpretation, that the judge must have regard primarily to the words of the contract in determining the intention of the parties, and if there is ambiguity he or she may consider objective evidence of the background facts that existed at the time of the execution of the contract, known as surrounding circumstances or the factual matrix.
Of particular interest is that Justice Betton held that “having a contract for a maximum of three years is really just having a three-year employment contract.” This begs an interesting question: what if a contract is for a minimum period of time, such as three years? The contract may be indefinite in that it goes beyond three years, but it is also for a fixed term because it is for three years with a possibility to be renewed or extended. The writer is of the opinion that minimum and maximum terms should both be regarded as indicia of a fixed term contract, as they both contemplate a fixed period of time which the employee relies on.