Insights Header image
Insights Header image
Insights Header image

“Don’t Worry, We All Know What That Clause Means” – Court Reaffirms The Importance of Carefully Drafting Fixed-Term Employment Agreements

June 2018 Employment and Labour Bulletin 2 minute read

Businesses and employees alike have been repeatedly reminded by their lawyers that employment contracts must be carefully and clearly drafted. The Ontario Superior Court recently pronounced itself on this issue in Norgren v. Plasma Power LLC.

In Norgren, the terminated plaintiff sought a ruling that his employment contract was for a 3-year, fixed-term, notwithstanding an early termination without cause from his employer. He argued that he was, therefore, entitled to be paid for the entire remaining balance of the contract upon termination. Contrary to the usual positions taken in fixed-term cases, the employer, in Norgren,  argued that the employee was (only) entitled to common law notice.

The contract contained only one statement indicating that it might be for a fixed term: “[the agreement] will time out in 3 years and the goals will be reset.” With no other language or reasonable indicator that the contract was meant to expire after three years, the Court ruled that the above phrase was insufficient to denote a fixed-term contract.

In discussing what is required for a fixed-term employment agreement, the Court wrote that it must determine whether there is any ambiguity to the language relied upon. In this case, the term “and the goals will be reset” was unambiguous, just not in the way the plaintiff employee would have liked. Rather than stipulate a fixed-term, using language that evidenced some kind of surviving obligation demonstrated an intention to have an indefinite employment term. As a rule, to find that there is a fixed-term contract requires unequivocal and unambiguous language to that effect.

As a result, the Court awarded Norgren common law notice of termination; not the full contract value which he sought.

Takeaways for Employers

Fixed-term agreements continue to be scrutinized by the courts. Norgren demonstrates the importance of using unequivocal contract language, especially when establishing a fixed-term employment contract. A Court will not find that an employee’s term of employment is fixed unless a contract explicitly says as much and lacks indicators of a contrary intention.

Interestingly, the Court was silent on Ontario Regulation 288/01 to the Employment Standards Act, 2000 “Termination and Severance of Employment”. Section 2 of the Regulation stipulates that the termination without cause entitlements in the ESA are not applicable where a contract term has expired, unless the task for which the employee was hired lasts more than 12 months or is not yet completed in 12 months. It is likely that the Court did not consider the Regulation because the employee was, at least, entitled to common law rather than the statutory notice of termination. Nevertheless, employers should be aware of this important stipulation before considering a fixed-term employment agreement.

by Kyle Lambert and Martin Thompson

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained

Insights (5 Posts)View More

Featured Insight

Double the Trouble: The BCCA Refuses to Strike Duplicative Class Actions Before Certification

Class action bulletin. Summary of InvestorCOM Inc. v. L'Anton, 2025 BCCA 40, a recent decision of the BCCA on the issue of duplicative class actions.

Read More
Feb 12, 2025
Featured Insight

Recent Developments in the Canadian Psychedelics Industry

This bulletin provides an update on recent developments in Canada's psychedelics industry.

Read More
Feb 12, 2025
Featured Insight

Company Ordered to Cease Using Facial Recognition Technology to Monitor Access to its Facilities: Overview of Quebec Privacy Regulator’s Decision

In this bulletin, we provide an overview of the Quebec privacy regulator's decision in ordering the Company to cease using its facial recognition technology.

Read More
Feb 11, 2025
Featured Insight

Significant Changes to the Québec Mining Regime are Now in Force

Significant amendments to the Québec mining regime tabled by the Government in the spring 2024 came into force late last year.

Read More
Feb 11, 2025
Featured Insight

Thumbs Up or Signed Deal? Court Affirms Emoji as Valid Acceptance of Agreement

We discuss the Saskatchewan Court of Appeal's decision on whether a “thumbs up” emoji sent through a text message is acceptance of a contract.

Read More
Feb 10, 2025