Toronto Employment Lawyer Advising on Fixed-Term Contract Employees

Fixed-term contract employees are hired by an employer for a defined period, in contrast to traditional employees who are typically hired for an indefinite period. A fixed-term employment contract specifies the date on which employment will end, allowing parties to plan for its eventual end and eliminating the need for reasonable notice. Employers often choose to hire a fixed-term contract employee if they require coverage for another employee who is on leave or require additional help to complete a specific project. While hiring a fixed-term contract employee relieves employers of some of the expenses associated with permanent or indefinite employees, employers must be aware of their obligations towards fixed-term employees to avoid liability when the working relationship ends. 

The team at Haynes Law Firm in Toronto has been helping employers understand their responsibilities regarding fixed-term contract employees since 1994. The firm’s founder, Paulette Haynes, has written the country’s definitive text on non-standard employment arrangements and is frequently sought after by employers across various industries for her expertise in this area. Paulette works with employers to reduce the risk of liability when hiring fixed-term contract employees.

Defining the Fixed-Term Contract Employee

Contract workers and their employment are usually defined by the presence of the following conditions:

• The term of employment is of a definite duration;
• The project or series of tasks assigned to the employee must be performed within a certain period of time;
• The contract employee has no permanent status with the employer;
• The contract employee is typically not a member of a union;
• The contract employee brings a specialized skill or set of skills to the job; and
• The contract employee fulfils a short-term or temporary need of the employer.

Defining the Terms of a Fixed-Term Employment Contract

A fixed-term contract employee has the same employment rights as a permanent employee, but there is a mutual expectation between the employer and the employee that the relationship will end upon the date specified in the contract. To avoid misunderstandings, employers should set out the following details in a fixed-term employment contract:

• The start and end date of the employment term;
• The title of the position;
• A description of the employee’s duties that is flexible enough to allow for changes over time, while still clearly defining the project or tasks to be completed during the contract;
• The expected hours of work;
• The form of remuneration (e.g. pay period, or pay-per-project)
• A carefully worded termination clause enabling the employer to terminate the working relationship before the end of the contract’s term without triggering a contract buyout.

Termination of Fixed-Term vs. Indefinite-Term Employment Contracts

Most employees in Canada operate under an employment contract of indefinite duration. Their employment can be terminated by the employer upon providing the employee with reasonable notice or pay in lieu of notice. The amount of notice or pay in lieu of notice required depends on the nature of the employee and may be dictated by the Employment Standards Act, common law, and/or the employment agreement.

Fixed-term contracts, however, have become increasingly popular in Canada, particularly where an employer requires a worker to provide a needed skillset or service for a set period of time. This type of employment ends on a date specified in the contract, or when the required task has been completed. Employers are therefore not required to provide fixed-term contract employees with reasonable notice as their employment simply ends at the expiry of the contract.

There are some limited circumstances, however, where a fixed-term contract employee will be entitled to reasonable notice or termination pay:

• The employment is terminated before the expiry of the term set out in the employment contract;
• The term expires or the project remains incomplete more than 12 months after the start of employment; or
• The employment continues for three months or longer after the expiry of the term set out in the employment contract.

Wrongful Dismissal of Fixed-Term Contract Employees

It is important to note that the language used in a fixed-term employment contract does not prevent a court from finding the employee has become, or has always been, an indefinite-term employee. Courts consider the overall character of an employment relationship as the deciding factor when determining an employee’s status.

For example, where an employee has operated under a series of consecutive fixed-term contractors for several years, a court may view employment agreement to be an indefinite-term contract. In such a situation, the employer would be required to provide reasonable notice or pay in lieu of notice, and the failure to do so would constitute wrongful dismissal.

Some fixed-term employment contracts contain automatic renewal clauses. When these clauses are included in a fixed-term contract, employers must make sure they clearly indicate their intention to terminate a contract prior to the automatic renewal so they do not lose their limited liability to the fixed-term employee.

Given the challenges that can be present in establishing a fixed-term employment relationship, employers should seek legal advice when drafting a fixed-term contract. Employment lawyers can also provide guidance throughout the employment contract(s) to avoid a fixed-term employee inadvertently becoming an indefinite employee. This can help employers avoid future liability for reasonable notice and termination pay, or a wrongful dismissal claim.

Statutory Benefits and Entitlements for Fixed-Term Contract Employees in Ontario

The Employment Standards Act

Fixed-term contract employees are entitled to many of the same rights as indefinite-term employees as set out in the Employment Standards Act, including:

• Vacation time, or pay in lieu
• Overtime pay
• Leave, including parental and maternity leave

As with indefinite-term employees, fixed-term employees must meet the eligibility criteria of a particular benefit to receive it. For example, the Employment Standards Act only provides for vacation with pay for employees who have worked for the same employer for a year. A fixed-term employee would therefore be required to work for the employer for a year before being eligible to receive paid vacation.

Workers’ Compensation and Occupational Health and Safety

Fixed-term contract employees who have sustained a work-related injury are entitled to workers’ compensation benefits under the Workers’ Compensation Act, so long as the employer pays premiums into the workers’ compensation accident fund. The Occupational Health and Safety Act also applies to fixed-term employees. They are therefore entitled to the rights and protections under that Act, such as the right to refuse unsafe work.

Employment Insurance

Federal employment insurance benefits under the Employment Insurance Act of Canada may be available to a fixed-term contract employee who has been terminated, so long as they have the required number of hours of insurable employment (set by their regional rate of unemployment).

Non-Statutory Employment Benefits

Employers are not required to provide additional benefits, but fixed-term employees may be able to negotiate benefits like medical insurance in some cases. If the employer offers additional benefits to a fixed-term contract employee, the contract should describe the extent of the benefits coverage and any eligibility criteria. Further, the agreement should indicate under which circumstances, if any, the employee will be entitled to these benefits upon termination.

Contact Haynes Law Firm in Toronto for Advice on Regular and Fixed-Term Employment Relationships

Haynes Law Firm provides advice to employers on their legal obligations to fixed-term contract employees and ensures the fixed-term status is reflective of their current role. The founder of the firm, Paulette Haynes, has represented employers in workplace disputes and litigation matters for nearly three decades. Her extensive history of advocating for clients’ interests in different dispute resolution processes has given her the knowledge and foresight to proactively identify areas of potential liability. Paulette’s dedication to employment law is reflected in her academic history as a legal scholar, and she shares her comprehensive knowledge of employment litigation and advocacy as a legal studies professor. 

For assistance with regular and fixed-term employment matters, contact the firm at 416-593-2731 or online for a consultation.