Understanding Ontario Appeal Court’s Ruling on Fixed-Term Contracts

Written by on May 24, 2024 in Employment Law Blog, Focus on Canadian Cases
Fixed-Term Contracts

In a recent decision, the Court of Appeal for Ontario addressed the complexities surrounding fixed-term contracts and termination clauses. In Kopyl v. Losani Homes, the court clarified that an invalid termination clause does not invalidate a fixed-term clause, reinforcing important considerations for employers.

Let’s delve deeper into the key aspects of this ruling and its implications for employers in Ontario.

Understanding the Case Background

The case revolved around an employee hired under a one-year fixed-term contract, which included termination clauses. When the employer terminated the employee’s contract prematurely, a dispute arose regarding the validity of the termination clauses and the employee’s entitlement to compensation.

Employee’s Argument

The employee contended that the termination clauses were void due to contravention of the Employment Standards Act, 2000 (ESA). As a result, she argued that she was entitled to receive compensation for the unexpired portion of the fixed term without any duty to mitigate damages.

Employer’s Argument

The employer acknowledged the invalidity of the termination clauses but argued that this invalidated the fixed-term clause as well. Therefore, the employer asserted that the employee was not entitled to compensation for the unexpired portion of the term and, instead, was subject to “reasonable notice” at common law.

The decision of the Lower Court

The lower court ruled in favour of the employee, emphasizing that a fixed-term clause is distinct from a termination clause. Consequently, despite the invalid termination clauses, the fixed-term clause remained in effect, entitling the employee to compensation for the unexpired term without any duty to mitigate.

Court of Appeal’s Ruling

The appellate court upheld the lower court’s decision, emphasizing that an invalid termination clause does not invalidate a fixed-term clause. The court clarified that the employee was entitled to compensation for the unexpired term without any duty to mitigate damages.

Implications for Employers

The ruling underscores the importance of carefully drafting employment contracts, particularly regarding termination clauses and fixed-term arrangements. Employers must ensure compliance with employment legislation to avoid potential legal liabilities.

Key Takeaways for Employers

  1. Review Employment Agreements: Employers should regularly review and update employment agreements, ensuring compliance with current legislation and legal standards.
  2. Seek Legal Guidance: It is advisable for employers to seek the guidance of experienced employment counsel when drafting employment agreements, especially regarding termination clauses and fixed-term arrangements.
  3. Consider Individual Circumstances: Each case is decided based on its unique facts. Employers should carefully consider the specific circumstances of their workforce when drafting employment agreements ensuring that they are not pro forma.
  4. Stay Informed: Given the evolving legal landscape, employers should stay informed about relevant court decisions and legislative changes that may impact employment practices.

Contact Minken Employment Lawyers Today

For expert guidance on drafting employment agreements and navigating complex employment law matters, contact Minken Employment Lawyers (Est. 1990). Our experienced team can provide tailored solutions to meet your organization’s needs and mitigate legal risks. Schedule a consultation today at 905-477-7011 or email us at contact@minken.com for a consultation to ensure compliance and protect your business interests.

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Please note that this article is for informational purposes only and does not constitute legal advice.

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