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About fixed term contracts

Prepared by Kenneth Armstrong KC

· Employment

Most employees who are hired permanently are hired on what’s called an indefinite hire basis; however, employers and employees can agree to a specified term of employment, i.e. for three years. That is permissible. Students’ summer jobs are often fixed term contracts as they are specified as for the summer. Any fixed term contract of a year or longer should be in writing. Parties to fixed term agreements can agree to a variety of terms, including scheduled raises, scheduled performance or salary reviews, and notice of termination provisions. The agreement should also specify what happens at the conclusion of the fixed term: does employment continue or does it end?

So long as the notice of termination provisions are not less than the Employment Standard Act minimums (see our article on Assessing Severance Pay), they will be binding even thought it’s a fixed term contract. However, if there are no notice of termination provisions in a fixed term contract, then the employer could be liable to pay out salary for the remaining term if they terminate the contract without just cause, and the employee could be liable for damages suffered by the employer if the employee quits without just cause.

 

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