Courts reluctant to enforce contracts that specify life as a fixed-term, regardless of which side wants it enforced
Experienced human resources personnel know Canadian courts are reluctant to enforce fixed-term employment contracts. Typically it’s the employer that attempts to enforce a fixed-term contract of employment.
As legal author Geoffrey England wrote, “the courts require unequivocal and explicit language to establish such a contract, and will interpret any ambiguities strictly against the employer’s interests.”
But what about the situation where an employee is seeking to enforce a fixed-term contract that attempts to guarantee her job for the rest of her working life? Based upon a recent Court of Appeal decision, it appears the courts will be equally reluctant to enforce such a contract when it is to the employee’s benefit as when it is to their detriment.
The Ontario Court of Appeal previously addressed the issue of fixed-term contracts in 2001 in the case of Ceccol v. Ontario Gymnastics Federation.
In that case the employment relationship was governed by a series of one-year contracts, each one stating it was subject to renewal if the employee received a favourable review and if the terms and conditions of renewal could be agreed upon.
After 15 consecutive and uninterrupted years of employment, the plaintiff and other employees were told their contracts would not be renewed. The plaintiff sued for wrongful dismissal, taking the position that the court should look behind the wording of her agreement and find that the reality was that she was employed indefinitely.
The Court of Appeal confirmed that fixed-term contracts of employment are legal, with the caveat that “if their terms are clear, they will be enforced.”
They also noted that the consequences of finding a contract of employment is for a fixed-term are serious in that the protection of the Employment Standards Act and the common law do not apply.
As a result the court cautioned against allowing employers to evade those protections by calling something a fixed-term contract when the “underlying reality... 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.”
In that particular case, the employee’s entitlement would have been $7,700 if the contract were found to be fixed-term, as compared to $66,700 if it were indefinite.
The court found the terms of the contract were not sufficiently “unequivocal and explicit” to establish a fixed-term contract.
Novel scenario: Employee trying to enforce fixed-term contract
The Court of Appeal was recently called upon again to consider the issue of fixed-term employment contracts. However in Foreman v. 818329 Ontario Ltd. [2003] O.J. No. 3327, the court addressed the somewhat novel scenario where the employee was the party seeking to enforce a fixed-term contract.
What made the case even more unusual was that the alleged “fixed term” of the contract was the lifetime of the employee. Anne Marie Foreman managed two bingo halls owned by the defendant company. When she was hired, she was romantically involved with John Kirby, part-owner of the two bingo halls. When the ownership of the bingo halls was transferred to Frank Dimaria, Foreman was concerned she might be replaced and asked Kirby to prepare an employment contract that would provide her with some security.
Kirby prepared a contract that, among other things, described her position in detail, and then stated, simply, that “818329 and Suhan shall not dismiss Anne Marie.” (818329 and Suhan were the two bingo halls and Anne Marie was the plaintiff.)
Apparently there was a suggestion by counsel that the words “except for cause” be added but that was not acted upon. Nine months after the contract was signed, Foreman’s employment was terminated. She then started an action for wrongful dismissal.
Employee awarded 33-years’ notice
At trial it was found she was terminated without cause. The trial judge accepted that Foreman’s contract was for a fixed-term — her lifetime — and that it could only be terminated by her.
She was awarded damages in the amount of $712,000, representing the income she would have earned over the remainder of her working life. Since she was 32 at the time her employment was terminated, this represented 33 years of income. The damages awarded included potential income from a new form of lottery that became legal two years after the plaintiff was fired, and which the trial judge found she would likely have been allowed to distribute.
Lifetime employment requires clear articulation
On appeal the sole issue was the amount of damages. The Court of Appeal confirmed it is possible to have a fixed-term employment contract for the lifetime of the employee. For the court, Justice Rosalie Silberman Abella wrote that “lifetime employment, while legal, and in some cases even desirable, nonetheless requires even clearer articulation given the profound financial responsibility of such a guarantee.”
The court found there was no explicit language unequivocally stating the fixed-term was for the plaintiff’s life or until retirement. The evidence, including Foreman’s, was that the parties sought to protect her from dismissal resulting from the change in management. It was not to provide her with employment for the rest of her life.
As the contract was drafted on behalf of Foreman, the court interpreted the ambiguity against her. They found the contract did not protect her from dismissal for the rest of her life.
As a result the court found her contract to have been of indefinite duration and found she was entitled to 12-months’ notice. The result of this finding was that her damages were limited to $30,800.
The decision in Foreman shows the courts are reluctant to enforce fixed-term contracts even when doing so would be to the advantage of the employee. The moral of the story is that anyone seeking to draft a fixed-term employment contract should ensure they use the clearest, most unambiguous language. Otherwise it is quite possible that your “fixed-term contract” will be found to be of indefinite duration.
For more information see:
• Ceccol v. Ontario Gymnastics Federation, 2001 CarswellOnt 3026, 11 C.C.E.L. (3d) 167 (Ont. C.A.).
• Foreman v. 818329 Ontario Ltd. [2003] O.J. No. 3327.
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at
As legal author Geoffrey England wrote, “the courts require unequivocal and explicit language to establish such a contract, and will interpret any ambiguities strictly against the employer’s interests.”
But what about the situation where an employee is seeking to enforce a fixed-term contract that attempts to guarantee her job for the rest of her working life? Based upon a recent Court of Appeal decision, it appears the courts will be equally reluctant to enforce such a contract when it is to the employee’s benefit as when it is to their detriment.
The Ontario Court of Appeal previously addressed the issue of fixed-term contracts in 2001 in the case of Ceccol v. Ontario Gymnastics Federation.
In that case the employment relationship was governed by a series of one-year contracts, each one stating it was subject to renewal if the employee received a favourable review and if the terms and conditions of renewal could be agreed upon.
After 15 consecutive and uninterrupted years of employment, the plaintiff and other employees were told their contracts would not be renewed. The plaintiff sued for wrongful dismissal, taking the position that the court should look behind the wording of her agreement and find that the reality was that she was employed indefinitely.
The Court of Appeal confirmed that fixed-term contracts of employment are legal, with the caveat that “if their terms are clear, they will be enforced.”
They also noted that the consequences of finding a contract of employment is for a fixed-term are serious in that the protection of the Employment Standards Act and the common law do not apply.
As a result the court cautioned against allowing employers to evade those protections by calling something a fixed-term contract when the “underlying reality... 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.”
In that particular case, the employee’s entitlement would have been $7,700 if the contract were found to be fixed-term, as compared to $66,700 if it were indefinite.
The court found the terms of the contract were not sufficiently “unequivocal and explicit” to establish a fixed-term contract.
Novel scenario: Employee trying to enforce fixed-term contract
The Court of Appeal was recently called upon again to consider the issue of fixed-term employment contracts. However in Foreman v. 818329 Ontario Ltd. [2003] O.J. No. 3327, the court addressed the somewhat novel scenario where the employee was the party seeking to enforce a fixed-term contract.
What made the case even more unusual was that the alleged “fixed term” of the contract was the lifetime of the employee. Anne Marie Foreman managed two bingo halls owned by the defendant company. When she was hired, she was romantically involved with John Kirby, part-owner of the two bingo halls. When the ownership of the bingo halls was transferred to Frank Dimaria, Foreman was concerned she might be replaced and asked Kirby to prepare an employment contract that would provide her with some security.
Kirby prepared a contract that, among other things, described her position in detail, and then stated, simply, that “818329 and Suhan shall not dismiss Anne Marie.” (818329 and Suhan were the two bingo halls and Anne Marie was the plaintiff.)
Apparently there was a suggestion by counsel that the words “except for cause” be added but that was not acted upon. Nine months after the contract was signed, Foreman’s employment was terminated. She then started an action for wrongful dismissal.
Employee awarded 33-years’ notice
At trial it was found she was terminated without cause. The trial judge accepted that Foreman’s contract was for a fixed-term — her lifetime — and that it could only be terminated by her.
She was awarded damages in the amount of $712,000, representing the income she would have earned over the remainder of her working life. Since she was 32 at the time her employment was terminated, this represented 33 years of income. The damages awarded included potential income from a new form of lottery that became legal two years after the plaintiff was fired, and which the trial judge found she would likely have been allowed to distribute.
Lifetime employment requires clear articulation
On appeal the sole issue was the amount of damages. The Court of Appeal confirmed it is possible to have a fixed-term employment contract for the lifetime of the employee. For the court, Justice Rosalie Silberman Abella wrote that “lifetime employment, while legal, and in some cases even desirable, nonetheless requires even clearer articulation given the profound financial responsibility of such a guarantee.”
The court found there was no explicit language unequivocally stating the fixed-term was for the plaintiff’s life or until retirement. The evidence, including Foreman’s, was that the parties sought to protect her from dismissal resulting from the change in management. It was not to provide her with employment for the rest of her life.
As the contract was drafted on behalf of Foreman, the court interpreted the ambiguity against her. They found the contract did not protect her from dismissal for the rest of her life.
As a result the court found her contract to have been of indefinite duration and found she was entitled to 12-months’ notice. The result of this finding was that her damages were limited to $30,800.
The decision in Foreman shows the courts are reluctant to enforce fixed-term contracts even when doing so would be to the advantage of the employee. The moral of the story is that anyone seeking to draft a fixed-term employment contract should ensure they use the clearest, most unambiguous language. Otherwise it is quite possible that your “fixed-term contract” will be found to be of indefinite duration.
For more information see:
• Ceccol v. Ontario Gymnastics Federation, 2001 CarswellOnt 3026, 11 C.C.E.L. (3d) 167 (Ont. C.A.).
• Foreman v. 818329 Ontario Ltd. [2003] O.J. No. 3327.
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at
