Howard v. Benson Group: Ending a Fixed-Term Contract Early
A fixed-term contract sets an end date for the job. But what if the employer ends it early? In Howard v. Benson Group Inc., 2016 ONCA 256, the Ontario Court of Appeal held that, unless the contract clearly provides otherwise, the employee is owed pay for the remainder of the term.
- If a fixed-term contract has no valid early termination clause, an employer that ends it early owes the balance of the term.
- The employee has no duty to mitigate in that situation: earnings from a new job don't reduce the award.
- A valid early termination clause can limit what is owed, but it must comply with the ESA.
- Repeatedly renewing fixed-term contracts can turn the job into an indefinite one in law.
The case
Mr. Howard had a five-year fixed-term contract with a company that ran automotive businesses. He was let go after about 23 months. The contract had a termination clause, but the court found it unenforceable because it was ambiguous and didn't clearly provide for the ESA's minimums. The Court of Appeal held that he was entitled to his pay for the rest of the five-year term, and that there was no duty to mitigate because the contract effectively fixed the amount owed.
Practical lessons
- Employees: if you're on a fixed-term contract that ends early, check whether there is a valid early termination clause. If not, you may be owed the rest of the term.
- Employers: include a clear early termination clause that complies with the ESA, or accept the risk of paying out the term.
- Successive fixed-term contracts for ongoing work can be treated as indefinite employment, with reasonable notice on termination.
Common questions
My fixed-term contract simply expired. Am I owed notice?
Generally not at common law, if the term was genuine and the end date was clear. But the ESA's minimums may still apply in some cases, such as long periods of repeated renewals.
Photos from Pexels: Signing a contract with a pen · A desk with a laptop, a plant and a contract.
This article is general information for people in Ontario, not legal advice. Rules, forms and deadlines change, and every situation is different. Check the current rule or speak to a licensed legal professional before you act.
Not sure where you stand? A licensed paralegal can look at your documents and tell you your options.
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