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Fixed-Term Employment Contracts at the Ontario Court of Appeal

Fixed-Term Employment Contracts at the Ontario Court of Appeal

Jessica McClayThe Ontario Court of Appeal released its decision on April 6, 2017 in Covenoho v. Pendylum Ltd., 2017 ONCA 284, overturning a motions judge’s finding on a summary judgment motion. This case provides a quick highlight of the rules that apply to fixed-term contracts of employment, where the employment contract is for a defined period of service.

The appellant, Ms.Covenoho, was dismissed from a fixed-term contract. Her contract set out that she would be given two weeks of notice but no notice pay, regardless of when during the contract she was terminated.

When she was terminated after less than three months, Ms.Covenoho sued for the balance of the pay she would have earned during her fixed-term contract, which came out to 40 weeks or $56,000.00. The motions judge found that she was entitled to nothing, as under the Employment Standards Act an employee is not entitled to notice if they have worked less than three months.

On appeal, the Ontario Court of Appeal referred back to the more general principles in interpreting the Employment Standards Act as set out in jurisprudence including Wright v. Young & Rubicam Group of Cos. and in Machtinger v. HOJ Industries Ltd, as well as its recent decision in Wood v. Fred Deeley Imports Ltd. Under these principles the question to ask is whether the termination provision in an employment contract potentially violates the Employment Standards Act minimums. The rationale is that if Ms.Covenoho had been terminated later in her contract, then the termination clause might have violated the Employment Standards Act minimums.

Therefore, the Court of Appeal concludes that, because the appellant’s employment was not validly terminated and there was no enforceable contractual provision setting out a fixed term of notice, she was entitled to receive pay for the period until the end of her contract.

This writer would comment that this finding from the Court of Appeal is consistent with the normal principles of employment law. Many dismissed workers will not have the resources necessary to take a case to the Court of Appeal in order to get compensation for their termination. Employment law therefore tends to provide the benefit of the doubt to these workers in the way that termination provisions are to be interpreted.