Beware of Fixed Term Employment Contracts

A recent decision of the Ontario Court of Appeal (which the Supreme Court of Canada has declined to reconsider) highlights the danger of using fixed term employment contracts.  The employee was hired for a 5 year term pursuant to a written employment agreement.  The agreement also stated that “Employment may be terminated at any time and the amounts paid to the employee shall be in accordance with the Employment Standards Act”.  After 23 months, the employee was fired and paid two weeks’ severance in accordance with the Employment Standards Act.  The judge found the termination provision ambiguous, and ambiguity in an employment agreement is always construed against the employer.  The Court of Appeal agreed, and confirmed that the employee was entitled to be paid for the remainder of the 5 year term (a hit to the employer of $180,000, not including the legal fees of the case!).  If you use fixed term employment agreements, it is strongly recommended that the terms be precise and carefully drafted.