What is Required When a Fixed Term Contract has Expired?
There are many reasons an employer may want to hire a worker on a fixed term contract. It could be to cover a maternity/parental leave, complete a specific project or because there is a fixed budget. Other times, an organization and the employee like the sense of certainty and mutual commitment that can be created by a fixed term contract. Regardless of the reason, typically when an employee and employer enter into a fixed term contract it is understood that when the term has expired, there is no additional obligation to pay reasonable notice or severance. The Employment Standards Act, 2000 (ESA) Regulations 288/01 confirms that notice is not required where “an employee who is hired on the basis that his or her employment is to terminate on the expiry of a definite term or the completion of a specific task.” The idea is that the employee knew (or had notice) from the outset of when their final day of work would be.
There are some important exceptions to the rule that employees on term contracts do not need to be provided with notice. Specifically, reasonable notice is required when
(a) the employment terminates before the expiry of the term or the completion of the task;
(b) the term expires or the task is not yet completed more than 12 months after the employment commences; or
(c) the employment continues for three months or more after the expiry of the term or the completion of the task.
These exceptions can all take employers by surprise but my focus today is on the twelve month threshold. Whether it is an employee hired on a three year term or an employee who has had their terms renewed successively so that all together they have worked more than 12 months, the bottom line is that once that twelve month threshold is met, the employee will be entitled to reasonable notice of termination.
Where I see this exception having the most impact over the next while is in relation to term employees hired to cover parental leaves of absence. Previously, most “maternity leaves” were twelve months or less. A term employee hired to cover a one year maternity leave would not exceed the 12 month threshold under the ESA regulations meaning that employers did not have to give reasonable notice once the term expired. With the recent changes to both the Employment Insurance Act and the ESA, some new parents may now elect to take up to 18 months of job protected leave (parental and pregnancy leave). Consequently, more employers may find themselves hiring temporary or contract employees for 18 month terms. In these circumstances it will not be enough that the 18 month term contract comes to an end, employers will need to provide reasonable notice to those term employees hired to cover a parental leave which exceeds 12 months.
Take away – if you have a fixed term contract that lasts 12 months or more, employees will be entitled to reasonable notice. Employers may want to revisit their term contract agreements to specifically address the question of reasonable notice for term employees.