Employment Contracts

Specific Language to Create Fixed Term


“Unequivocal and explicit language”

Diana Ceccol was employed as the Administrative Director of the Federation from September 1981 to May of 1997. She was the number two person in the office of fourteen staff. She began employment on September 1, 1981 after accepting an offer of employment in July of the same year. For the following 15 years and 8 months, her employment was governed by a series of one year contracts, containing very similar terms. The contractual term ran for a period of 12 months, starting on July 1 and ending on June 30 of the respective years. The contract incorporated the ESA notice obligation.

On May 9, 1997 Ms. Ceccol was advised of her termination effective June 30, 1997. The same letter confirmed that she had received notice of termination on December 3, 1996 in writing. An offer was made of 3 months’ salary for a release which was declined.

The trial judge found that that the plaintiff was not subject to the employment agreement and that her employment was at common law. The Court of Appeal agreed, primarily due to the wording of the contract, which was used to expand into the “reasonable expectation of the parties”.

The words of the contract were as follows:

1.1            The Federation hereby hires the Employee and the Employee hereby agrees to serve as the Administrative Director of the Federation for a period of 12 months, commencing July 1, 1996 and terminating on June 30, 1997, unless sooner terminated or extended as hereinafter provided.

1.2            Subject to acceptable performance reviews, this Agreement is subject to renewal, upon the consent of both parties as to terms and conditions.

The Court of Appeal concluded that the words in question contemplated that the agreement may operate either shorter or longer than the 12 months “unless sooner terminated or extended as hereinafter provided”. Article 1.2 stated that the agreement was “subject to renewal” if the parties can agree to terms and conditions of renewal. The shorter life is considered in the termination provision.

This case stands for the proposition that (1) a long term employee is viewed sympathetically and (2) clear words are required to oust the common law remedy. It may have been appropriate that it was a gymnastics federation being sued as the Court of Appeal did its own handstand to make this decision. The Court spoke in these words:

[26]         It seems to me that a court should be particularly vigilant when an employee works for several years under a series of allegedly fixed term contracts.  Employers should not be able to evade the traditional protections of the ESA and the common law by resorting to the label of ‘fixed term contract’ when the underlying reality of the employment relationship is something quite different, namely, continuous service by the employee for many years coupled with verbal representations and conduct on the part of the employer that clearly signal an indefinite term relationship.

[27]         In the present case, Ceccol served the Federation loyally, professionally and continuously for almost 16 years.  The Federation does not say otherwise.  I cannot say that the contract which governed their relationship contains the “unequivocal and explicit language” necessary to establish a fixed term contract.  I conclude that the employment contract was for an indefinite term, subject to renewal and termination in accordance with other provisions in the contract.

A similar conclusion on comparable facts is seen in the decision of Festeryga, J. in Ben David v Congregation B’Nai Israel, decision released in April of 1999.The plaintiff was employed from June of 1969 to August of 1994 initially as a Teacher and Cantor and most recently as Assistant Rabbi in addition to the previous functions.

Employment agreements had been signed from time to time over the years. Frequently the plaintiff’s employment was not covered by an executed contract. Often the agreements contained a notice to renew provision which was not exercised even though the agreements were indeed renewed. One agreement was never signed. One agreement was signed, although the operative date was blank. A further agreement was signed but not dated by either party.

The trial judge found that the agreement in effect on termination would not govern the relationship, given the historical context and the assurances received by the plaintiff that he “could continue as long as he cared to”. The plaintiff “had complete trust in the defendant that he would be dealt with fairly”.

To add a touch of context to the contract argument, the following facts may be relevant. The plaintiff had been employed for 26 years. He was 59 years of age on termination. The Board had convinced him to continue his education to become a full time rabbi.

A common law notice was set at 30 months. No reasons were given for termination. Just cause was pleaded as grounds for termination. All allegations were withdrawn prior to trial. The trial judge found that “they were a personal attack on the plaintiff and his family to hurt them. To add to this the defendant dismissed the plaintiff’s wife to exacerbate the hurt to the plaintiff”. Punitive damages were assessed at $20,000.

This case is a text book example of how not to defend a termination claim, contract or not.

An employer would likely be better advised to use a fixed severance payment rather than successive employment contracts, which as in this case, totaled some 15 annual successive agreements.

A contrary conclusion was reached in Flynn v Shorcan, released July of 2004, in which Justice Ellen Macdonald upheld the fixed term contract in effect as of the date of termination.

Flynn had been employed with the company from November 1988 to December 2002. In late 1988 the company asked all its employees to sign a standardized employment agreement which incorporated a fixed term plus notice and severance as required by the ESA. The employee’s appeal failed.

Between January 1999 and December 2002, Flynn signed a series of fixed term contracts, each of which contained similar terms. The last of these agreements was for the period from November 30, 2001 to November 30, 2002. The contract was upheld.

The Court looked to this test in upholding the contract:

 In Ceccol v. Ontario Gymnastic Federation 2001 CanLII 8589 (ON CA), (2001), 55 O.R. (3d) 614, the Court of Appeal indicated, at para. 25, that “the consequences for an employee of finding that an employment contract is for a fixed term are serious …”. Accordingly, the courts require unequivocal and explicit language that the contract is for a fixed term and any ambiguities should be interpreted in favour of the employee. The Court of Appeal also indicated (at para. 26) that the courts should “be particularly vigilant when an employee works for several years under a series of allegedly fixed-term contracts.” The Court of Appeal concluded that the employment contract in Ceccol, supra, was for an indefinite term.

The trial judge noted that both parties were sophisticated and that the writings were clear and comprehensive. The Court of Appeal agreed.

Singh v Empire Life, a 2002 decision of the BC Supreme Court considered whether the parties had agreed to a fixed term contract. The plaintiff claimed a two year contract was verbally agreed on August 26, 1998. The “letter of comfort” given to the plaintiff September 1 confirmed the offer of employment, the compensation, position and start date. It made no reference to a fixed term.

On the first day of employment, Singh received a letter which stated as follows:

This letter while not a contract will serve as confirmation of our interim special financial arrangement for you as Regional Manager, Vancouver Bayshore intended to assist you in the initial period of our relationship. It is understood that this letter is for clarification purposes only and does not replace or change the Manager's Agreement which is the contract between you and Empire Life, a copy of which will be forthcoming.

You will be compensated according to the Manager's Agreement. However, during the initial start up period, your remuneration will be $170,000 per annum. Your compensation package will consist of two components, a base income and a discretionary allowance. The base income will be $12,500 per month or $150,000 per annum. The discretionary allowance will be $1,667 per month or $20,000 per annum.

The initial start up period will be a period of two years commencing from September 1, 1998. After the two years, the Manager's formula must exceed the initial remuneration.

If during the initial startup period, the formula exceeds the guarantee, you are permitted to switch to the formula. Reasonable progress, acceptable to the Company …

The plaintiff later signed an employment agreement dated February 3, 1999, which allowed for termination with notice as defined by provincial legislation. This later written agreement was found to be unenforceable due to lack of consideration.

The trial judge found, as was supported by the Court of Appeal, that there was an oral agreement for 2 years made on August 26, 1999 which was confirmed by a letter of comfort signed September 1, 1999. The Court of Appeal was split, with Justice Newbury dissenting. 1

The statutory issues are discussed subsequently.