In the recent Steele v. The Corporation of the City of Barrie, 2022 ONSC 7245 decision ("Steele"), the Ontario Superior Court of Justice provided some insight into when longer term fixed-term contracts can be enforceable.
Background – Fixed Term Employment Contracts
The distinction between a fixed term and indefinite term employment contract is critical because, typically, an employer is not liable for any notice or pay in lieu of notice upon the expiry of a fixed-term contract that has a term of less than twelve (12) months. Where a fixed-term contract is longer than twelve (12) months, the employee will have statutory notice or pay in lieu entitlements upon expiry of the term, but the common law notice entitlements would be considered satisfied by the notice of the end date of the contract given upon commencement of employment.
The Steele decision finds that an employee subject to an unambiguous fixed-term agreement with successive unambiguous renewals was not, by virtue of such renewals, an indefinite term employee and thus entitled to notice of termination or pay in lieu thereof at the end of the term (as the employee argued he should have been). This finding is noteworthy as it represents a departure from existing case law, where the courts have found that the use of successive fixed term contract renewals may result in the creation of an indefinite term relationship. The court in the Steele decision relied on the fact that the contract in question and the subsequent renewal letters were unambiguous in providing for a fixed term, despite the use of renewals, as further discussed below.
Key Facts
The Plaintiff, Greg Steele ("Mr. Steele"), a former employee of the Defendant, the City of Barrie (the "City") commenced employment with the City on June 4, 2014. Mr. Steele's initial terms and conditions of employment were governed by an employment agreement (the "Agreement"), which contained language that addressed the term of Mr. Steele's employment as follows:
The expected duration of your temporary employment is expected to be from June 5, 2014 to June 3, 2016 (approximately 2 years).
Thereafter, Mr. Steele was provided with four (4) consecutive extension notices, which expressly set out that (i) Mr. Steele's position with the City was "temporary", and (ii) outlined the relevant end date for each applicable extension notice (collectively, the "Extension Notices"). The final extension notice was set to end on December 31, 2017.
The City elected not to extend the Agreement and Mr. Steele's employment ended on December 31, 2017. Mr. Steele commenced a wrongful dismissal claim against the City, arguing that he was, in fact, indefinitely employed and therefore entitled to pay in lieu of notice of termination, as well as punitive damages.
Decision
The Court found that there was no ambiguity under the Agreement or the Extension Notices that Mr. Steele's employment with the City was for a fixed-term. While the Court noted that the Agreement only included an "approximately" two-year term, it was precise in setting out the exact dates for the employment's initial duration. Moreover, while the Court noted that the Extension Notices were poorly drafted, they were nevertheless clear and unambiguous relating (i) to the nature of the arrangement as "temporary", and (ii) that the Extension Notices set out the period of time for each successive extension. Accordingly, there was no breach of contract or wrongful dismissal and the Plaintiff was not entitled to recover any damages.
Further, even if there was ambiguity in the Agreement or Extension Notices, the court found that the following factors would have resolved such ambiguity:
- The job posting under which Mr. Steele was offered a position clearly described the position as temporary;
- That same job posting provided that the position was for "2 years approximately";
- The Extension Notices were granted before the end of the respective term, which served as proof that absent those Extension Notices, the employment term would have expired;
- The Extension Notices were pre-destined neither by the employment contract nor the words or conduct of the City;
- Both the Agreement and the Extension Notices confirmed that Mr. Steele's employment was "temporary"; and
- The Extension Notices all provided a date "up to" which the employment would run. Thus, if there was any ambiguity in the Agreement, the Court found that it should be resolved by the relevant Extension Notice.
Finally, the court rejected the argument that the continuous service over many years, together with successive extensions, established an indefinite-term relationship irrespective of the fixed-term contract. More specifically, there was no ambiguity in Agreement or the Extension Notice and no conduct or conversations involving Mr. Steele and the City which could have objectively signaled any other arrangement but a fixed term of employment. We note that the court distinguished prior case law on fixed-term agreements by relying upon the: (i) ambiguity in the contract, which included automatic or annual renewals; and (ii) the parties' conduct and intentions, which assisted in establishing that the employees were hired on an indefinite-term.
Take Away for Employers
The Steele decision is helpful for employers as it confirms that a clearly and unambiguously drafted fixed-term agreement with successive renewals, coupled with consistent conduct of the employer signaling the temporary nature of the relationship, will not render the fixed-term nature of the relationship indefinite. This case also continues to demonstrate the risks and pitfalls associated with placing a prospective employee on a fixed-term agreement. Employers should continue to ensure that when electing to hire a prospective employee under a fixed-term, the employment agreement is clear and unambiguous regarding the temporary nature of the position and that the employer's conduct supports the express fixed-term nature of the arrangement.
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