Casual legal: Tips for fixed-term contracts
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.
By Rielle Gagnon
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
Fixed-term employment contracts can be a useful tool when an employer needs an employee for a defined project, leave coverage, seasonal role, or other time-limited need. However, a poorly drafted fixed-term contract can create significant liability, particularly if the employer wants to end the relationship before the agreed end date.
As a starting point, while it is always advisable to have a written employment agreement, fixed term contracts longer than a year must be in writing to comply with the Statute of Frauds. Aside from this requirement, written terms reduce uncertainty and help ensure that both parties understood the employment was intended to end on a specific date. The contract should clearly identify the start date, the end date, and the fact that employment will automatically end on that end date unless the parties agree in writing to renew or extend the relationship. Employers should avoid vague references to the timeframe of the employment relationship, such as “approximately six months,” “until the project is complete,” or “subject to funding,” unless the contract carefully explains how the end point will be determined. If the end date is unclear, a court may find that the employee was not truly employed for a fixed term and may instead treat the relationship as indefinite employment. That can trigger statutory or common law notice obligations when employment ends.
Employers should also consider including an early termination or “escape” clause. Without one, if the employer terminates the employee before the expiry date, the employee may claim compensation for the balance of the term. For example, ending a two-year contract after six months could expose the employer to a claim for the remaining eighteen months of compensation. A termination clause should be clear, enforceable, and compliant with applicable employment standards legislation.
One reason fixed-term contracts are unique is that notice of the expected end of employment is included in the contract itself. By agreeing at the outset that employment will end on a certain date, the employee has advance notice of the employment end date. If the contract is properly drafted and the employment ends on the stated date, the employer generally should not need to provide additional common law notice simply because the term has expired.
Fixed-term contracts can provide certainty, but only when they are carefully drafted. Employers should ensure the contract is in writing, states a clear end date, explains that employment automatically ends on that date, and includes a legally compliant escape clause if early termination may be required.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1.800.661.7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310.MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
