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Employment - Fixed-Term Contracts. Kopyl v. Losani Homes (1998) Ltd.
In Kopyl v. Losani Homes (1998) Ltd. (Ont CA, 2024) the Court of Appeal considered the early termination of a fixed-term employment contract, and the voiding effect of ESA breach:[1] The appellant hired the respondent on a one-year fixed term contract from July 6, 2022, to July 6, 2023, (the “Term”) at an annual salary of $150,000. The employment agreement included both for-cause and without-cause termination clauses (collectively, the “Termination Clauses”).
[2] On January 9, 2023, the appellant purported to terminate the respondent’s employment on a without-cause basis and paid her four weeks salary, equal to $11,538.46.
[3] The respondent argued that the Termination Clauses in the contract were void on the basis that they contravened requirements set out in the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). Therefore, the respondent claimed that the appellant did not have the right to terminate her employment prior to the expiry of the Term and that she was entitled to be paid her salary for the Term’s unexpired portion, without a duty to mitigate her damages.[1]
[4] The appellant did not dispute the fact that the Termination Clauses contravened the ESA and were therefore void. However, relying upon this court’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, the appellant argued that, where one termination clause in an employment contract contravenes the ESA, all the termination clauses in the contract are automatically voided. The appellant further argued that the clause establishing a one-year limit to the respondent’s employment (the “Fixed Term Clause”) was in effect a termination clause. Thus, because the Termination Clauses in the contract were void, so too was the Fixed Term Clause. The legal consequence was that the respondent’s employment was not subject to a fixed term but, rather, was terminable upon the provision of “reasonable notice” at common law, subject to a duty on the respondent to mitigate her damages. The appellant maintained that the four-week salary that had been paid to the respondent more than satisfied its obligations upon termination.
[5] The application judge rejected the appellant’s position and found that the invalidity of the Termination Clauses did not affect the validity of the Fixed Term Clause. Relying on this court’s decision in Howard v. Benson Group Inc., 2016 ONCA 256, 129 O.R. (3d) 677, at para. 21, the application judge found that a contractual provision providing for a fixed term of employment was not a termination clause since, upon the expiry of said fixed term, the employment relationship automatically terminates without any obligation on the employer to provide notice or payment in lieu of notice. Therefore, despite the invalidity of the Termination Clauses, the Fixed Term Clause remained in effect. The legal consequence was that the respondent’s employment had been wrongfully terminated and she was entitled to receive payment equal to her salary and benefits for the unexpired portion of the Term, less any amounts paid by the appellant, without any duty to mitigate.
[6] On appeal, the appellant argues that the application judge failed to properly apply Waksdale, that the invalidity of the Termination Clauses should have voided the Fixed Term Clause, and that the respondent was entitled only to the provision of reasonable notice, rather than compensation for the unexpired portion of the Term.
[7] We do not agree. Although the application judge’s decision is reviewable on a correctness standard,[2] the application judge made no error in finding this court’s decision in Benson Group Inc. to be dispositive of the application.
[8] In Benson Group Inc., the invalidity of a clause providing for early termination of the employment agreement on a without cause basis did not alter the legal effect of the provision fixing the term of the contract. Because there was no enforceable provision providing for early termination without cause, the employee was entitled to receive the compensation they would have earned to the end of the term, without any duty to mitigate.
[9] Waksdale, which did not involve a fixed-term employment agreement, involved entirely different circumstances and has no application to this case. Waksdale merely held that the invalidity of a particular termination clause in an employment contract voided other termination provisions in the agreement, with the result that the employee was entitled to reasonable notice upon termination of their employment. Waksdale made no reference to Benson Group Inc., nor did it suggest that the invalidity of the termination clause in an employment contract had the effect of converting a fixed term contract into one terminable on reasonable notice. . Howard v. Benson Group Inc. (The Benson Group Inc.)
In Howard v. Benson Group Inc. (The Benson Group Inc.) (Ont CA, 2020) the Court of Appeal considers the law of terminating a fixed-term employment contract:[20] There is a common law presumption that every employment contract includes an implied term that an employer must provide reasonable notice to an employee prior to the termination of employment. Absent an agreement to the contrary, an employee is entitled to common law damages as a result of the breach of that implied term: Bowes v. Goss Power Products Ltd., 2012 ONCA 425, 351 D.L.R. (4th) 219, at para. 23. This presumption can only be rebutted if the employment contract “clearly specifies some other period of notice, whether expressly or impliedly”: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 998; Ceccol v. Ontario Gymnastic Federation (2001), 2001 CanLII 8589 (ON CA), 55 O.R. (3d) 614 (C.A.), at para. 45. The question, then, is whether the motion judge erred in holding that the Employment Contract, without Clause 8.1, failed to rebut that presumption by clearly specifying some other period of notice, expressly or impliedly.
[21] In my view, the motion judge erred in so holding. Where an employment agreement states unambiguously that the employment is for a fixed term, the employment relationship automatically terminates at the end of the term without any obligation on the employer to provide notice or payment in lieu of notice. Such a provision, if stated unambiguously, will oust the implied term that reasonable notice must be given for termination without cause: Lovely v. Prestige Travel Ltd., 2013 ABQB 467, 568 A.R. 215, at para. 135; Ceccol, at para. 25.
[22] Of course, parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of notice or payment in lieu. However, and on this point the appellant and the respondent agree, if the parties to a fixed term employment contract do not specify a pre-determined notice period, an employee is entitled on early termination to the wages the employee would have received to the end of the term: Lovely, at para. 136; Bowes, at para. 26; Canadian Ice Machine Co. v. Sinclair, 1955 CanLII 44 (SCC), [1955] S.C.R. 777, at p. 786.
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