Types of Contract Durations

The type of employment contract will impact an employee's entitlements upon termination and their mitigation obligations. The duration of the contract is one important factor, with there being two primary types of contract durations:

• Indefinite duration contracts: The employment continues until either the employee or employer choose to terminate it.
• Fixed term contracts: The employment ends after a set amount of time.

When an employee is dismissed from an indefinite contract, they are presumptively entitled to reasonable notice unless the employment contract states otherwise. Fixed term contracts are different. When they are terminated early an employee is presumptively entitled to all of the income they would have earned for the remainder of the contract unless the contract states otherwise.

In previous posts we have discussed an employee's obligation to mitigate their damages, meaning to search for similar work to the position they lost. However, those posts were focused on indefinite term contracts. In the case of fixed term contracts, the law is unclear if the duty to mitigate applies in the same way. The British Columbia Court of Appeal has provided some guidance on the issue, but the question remains open.

Mitigation and Fixed Term Contracts

When a fixed term employment contract is terminated by the employer prior to the fixed end date, the legal assumption is that the employee is entitled to pay in lieu of notice equal to what they would have made over the remainder of the  contract. This rule applies unless the contract sets out the exact amount owed for early termination of the contract. Therefore damages for fixed term contracts are usually easier to calculate than for indefinite contracts and reasonable notice. The amount of damages is complicated however by whether a fixed term employee has an obligation to mitigate their damages.

This issue was recently considered by the British Columbia Court of Appeal in Quach v. Mitrux Services Ltd. The case dealt with a fixed term contract that was terminated before employment even began. Shortly after termination the employee found alternative employment. The Court acknowledged the law is unclear whether the duty to mitigate damages applies in fixed term situations. Then, the Court distinguished between the duty to mitigate, and mitigation that actually occurred. The Court did not decide whether a duty existed which would require an employee dismissed from a fixed term contract to seek new employment. However, the Court did state that mitigation income which had actually been earned was to be deducted from the amount of damages owing for termination of a fixed term contract.

Additionally, the Court clarified that the contract is always the ultimate authority when determining entitlements in such a situation. In Quach the contract set out an exact amount that was owing to the employee, and it was owing immediately upon termination of the employment. As a result the income the employee made later was irrelevant for mitigation purposes, as the amount owing under the contract should have been paid before any mitigation could occur.

Contracts Terminated After the End of the Fixed Term

In some cases the employment relationship continues beyond the fixed end date. In these cases the parties may have created a clear agreement with a new fixed end date, in which case the termination is treated the same as outlined above. However in other cases the employment may have continued without a new end date set. The British Columbia Supreme Court considered this situation in Whiting v. Boys and Girls Club Services of Greater Victoria. There an employee worked for the same employer for 13 years, partly under a series of set contracts. After the last fixed term contract expired they continued working for the employer for over a year. The Court determined normal reasonable notice entitlements applied in such cases. Therefore mitigation obligations would apply normally in such scenarios.

Conclusion

It is still unclear in British Columbia whether a fixed term employee has a duty to mitigate their damages.  If you’ve been dismissed early from a fixed term contract let us know. Our team can determine exactly what entitlements you have under your specific contract and determine the best way to pursue your claim.

About the Author

Dan Howitt assists both employees and employers with managing all phases of the employment relationship.  His focus is helping clients achieve a fair and cost effective solution to their employment related problems, with an emphasis on negotiation and settlement.  If you would like to schedule a meeting with Dan Howitt or any other of our lawyers, give us a call at 604-988-1000.