Term contract does not a temporary employee make

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Employers sometimes keep long-time employees on a series of successive short-term contracts. This may be done for the purpose of negotiating periodic salary increases or other adjustments to the conditions of employment. However, as a recent Ontario court decision spelled out, an employer may not be able to rely on an employee’s contract status to avoid the obligation to provide reasonable notice of termination.

In Ceccol v. Ontario Gymnastic Federation (February 15, 1999), a decision of the Ontario Court, General Division, the plaintiff had worked continuously for over 15 years as the employer’s Administrative Director and second highest-paid employee. For the last ten of those years, her employment was governed by a series of 12-month contracts, one of whose terms was that the parties agreed “to abide by the Ontario Employment Standards Act and regulations concerning notice of termination of employment”. When the employer decided to let the plaintiff go, it claimed that, despite her position and years of service, this provision entitled her to no notice of termination, although it did offer some notice as a courtesy.

EVIDENCE OF EMPLOYMENT STATUS

In court, the plaintiff gave uncontested evidence that, when she was hired in 1981, she had been led to believe her status was that of a permanent employee. She maintained that, except for the year of 1985-1986, she had always been treated and described as a full-time employee. This was the designation applied to her in her performance reviews. In 1986, she was offered the option of joining the employer’s group pension plan. Five months before her contract “expired”, she was asked to chair a task force that would require two years to complete its work.

The term contract, the plaintiff argued, was merely an administrative document, the true function of which was to implement yearly adjustments to her terms of employment. She had no reason to expect that such a document defined the amount of notice to which she would be entitled on termination.

The Court agreed, noting that the employer’s argument amounted to saying that a senior employee with 15 years of service was entitled to the same notice as an unskilled, entry level employee with one year, if they had signed the same contract. This result was not impossible, the Court said, but would require a much more explicit agreement than the one at issue.

PRESUMPTION OF REASONABLE NOTICE NOT REBUTTED

The Court pointed to the case law on standard form contracts, cases where one party had signed documents, the terms of which it had neither read nor understood, and where the other party ought to have known that the signing party was not fully aware of what it was agreeing to. Courts in these cases have held that those seeking to enforce such contract terms can do so only if they can establish that the other party had been given proper notice of the term and had truly agreed to it. In this case, the employer could not show that it had secured the plaintiff’s genuine consent to the termination clause in the term contract:

“[I]t was not reasonable to assume that the plaintiff had consented to the plain meaning of the terms of her contract…. As a result of the employer’s conduct throughout the years, the plaintiff had a reasonable expectation that the term and notice provision did not apply to her. Further, a standard form contract was used and the termination provision in the agreement is especially stringent and onerous.

Given that everyone involved treated this employee as a full-time permanent employee, with a certain status, I conclude that if the employer wished to enforce [the termination clause] against the plaintiff, it ought to have drawn to her attention that this clause did in fact apply to her. This was never done.”

Therefore, the Court held, given the evidence of the plaintiff’s status and the fact that the employer had done nothing to alert her to its view that the standard form termination provisions applied to her, the employer had not rebutted the presumption that the plaintiff was entitled to reasonable notice. The plaintiff was granted 12 months salary in lieu of notice, after four months were deducted for her failure to seek new employment to mitigate her damages.

In Our View

In the article, “The effective employment contract” on our Publications page, we discussed how courts will closely scrutinize whether contractual terms were freely negotiated by the parties or were dictated to the employee. In Ceccol, the additional issue is whether, as the employment relationship evolves, the “fine print” of an employment contract may be relied on by an employer to avoid its common law obligations. The answer appears to be that it may not. (For more recent developments, see “Court of Appeal upholds ruling that employee isn’t on “fixed term”” on our Publications page; see also “Long-serving employee on serial short-term contracts wins record notice and punitive damages” on our Publications page.)

For further information, please contact Colleen Dunlop at (613) 563-7660, Extension 222.