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What are the consequences of not renewing an employment contract for a long-time contract employee? • Accommodating an employee when she isn’t suitable for the modified position

What are the consequences of not renewing an employment contract for a long-time contract employee?

Question: We currently have an employment agreement with an employee who has done work for our firm for many years. Every year, we sign a new contract for the upcoming year. The period of her contract is ending soon, and I do not want to renew her contract, although she has done nothing to breach her contract. As an employer, are there any consequences to not renewing her contract?"

Answer: The answer to this question lies in both the text of the employment agreement and the conduct of the employer during the employment relationship, particularly during past points where the employee's contract has been renewed.

For some employers there are good reasons to have fixed-term employment arrangements. If an employer does not want to maintain an employment relationship with an employee after the expiration of the fixed term, there are no obligations under either the common law or the Ontario Employment Standards Act, 2000, so long as the fixed term is for a period of less than one year. With this in mind some employers attempt to hide a truly ongoing relationship with an employee in a series of one year fixed-term contracts that are very similar in nature. The perceived benefit to the employer is it can maintain what in many ways appears to be an ongoing relationship with a particular employee while taking on limited economic responsibility if it chooses not to renew the employee's fixed-term contract.

The Ontario Court of Appeal recently discussed this issue. The court looked at a long-term relationship between a non-profit athletic association and its administrative director. During the 15 years in which the administrative director worked for the gymnastics association, she was hired under a series of one-year contracts. The contracts were very similar to each other but also contained ambiguous language as to whether the contract had the option of being extended or not. The court noted some of the language of the contract could be construed as implying a right of renewal and that at many times the renewal process appeared to be relatively automatic. However, after 15 years of service, the athletic association gave notice it would not be renewing the administrative director's contract and would not calculate notice based on a senior employee of 15 years.

The relevant question for the court was should the employee be entitled to reasonable notice based on the shorter fixed-term of the contract or on the longer period of cumulative employment with the firm over the course of the consecutive fixed-term contracts? As in many other employment situations, the court was more interested in the reality of the employment situations as opposed to the formality of the employment contract. In all relevant respects, the court found this to be a situation of sustained and long-term employment. According to the court there was continuous service by the employee, coupled with ambiguous terms in the contract and conduct by the employer which indicated it perceived the conduct as being more than a one-year fixed term contract.

The court was very clear that an employer should not try and veil an ongoing employment relationship with consecutive fixed-term contracts where renewal provisions are, or could reasonably be considered to be, automatic and where the employer acts in a manner which implies that even it deems the employee to work under a contract of continuous service.

Thus if an employer has employees who are employed via a series of consecutive, fixed-term contracts which are subject to periodic renewal, there is no guarantee a court will not consider those employment relationships to be of continuous duration rather than simply for the fixed term. Furthermore, if the contract is for a fixed term which exceeds one year, the employment relationship will also be considered a continuous relationship and therefore an employer must ensure the contract complies with employment standards minimums with respect to notice on termination of employment.

When dealing with employees who may have fixed-term contracts renewed, the employer is well advised to take the following steps:

•All fixed term agreements should be for a term which does not exceed one year.

•The employer should review all employment agreements to ensure all contractual provisions discussing termination rights and renewal rights are clear and explicit and do not give the employee the impression of automatic renewal. The court noted that any equivocation or ambiguity within the contract will be interpreted strictly against the employer's interest.

•During the course of the employment agreement, ensure no representations are made to the employee that the contract will be automatically renewed.

•Institute a formal review process for each fixed-term employee before any contracts are renewed, so no employee could reasonably assume that the renewal was guaranteed.

Accommodating an employee when she isn’t suitable for the modified position

Question: We had an employee go on a leave of absence due to illness not related to work. This leave extended to two years and the employee is receiving long-term disability benefits. The employee has been given the go-ahead to return to work with permanent medical restrictions. The employee has also been receiving training through the company's benefits. We have positions that meet the medical restrictions but the employee doesn't have the experience necessary to be successful in these positions. Does the company still have a duty to accommodate and employ this person?"

Answer: For the purposes of this question we will assume it is a non-unionized environment, because if the employee in question is unionized, there likely will be relevant portions of the collective agreement which will detail both the worker's rights and the procedures which both employee and employer should follow if there is a dispute. In the non-unionized environment, the law in Ontario is evolving in these matters.

Traditionally the position has been that the employer has a very demanding duty to accommodate when an employee's injuries are related to work. In this case, if it were a work-related injury, due to workplace safety and insurance legislation the employer would not only have to make efforts to accommodate the employee within her own job, but also to provide that employee with an alternate position within the firm if her injury precluded her from returning to her prior work responsibilities.

For injured employees where their injuries were unrelated to the workplace, the law has been that employers only had to accommodate the individual within the context of the work responsibilities they held prior to the injury. But if the employee could not be accommodated within her particular position then the employer would have no further obligations. For example, if a filing clerk had gotten into a car accident, and she needed the assistance of a wheelchair, then the business would have to accommodate her ability to file documents by ensuring filing cabinets were within her reach. But if the effects of the employee's car accident left her unable to do filing under any circumstances, then the employer would have no further duty to accommodate, including no requirement for the employer to supply the employee with alternate work.

But human rights jurisprudence has been changing to mirror the responsibilities of employers in situations of employment-related injuries, and common law decisions have more and more been heading in that direction as well. Recently some courts have stated in obiter that even in situations of employee injuries unrelated to work, the employer may have an extended duty to accommodate.

This means the employer in question would not be able to rely on the distinction between employees injured at work and those injured outside of the workplace. For many this could be an important shift in the law whereby an employer's duty to accommodate will be broadened in scope to include not only accommodating the employee within her previously held position, but also potentially accommodating the employee by creating a new position which she is capable of doing based on her medical restrictions.

Therefore, in this particular situation the employer would be well-advised to give this employee the opportunity to perform the available position which meets her medical restrictions.

Peter Israel is the head of Goodman and Carr LLP’s Human Resource Management Group. He can be reached at (416) 595-2323 or [email protected]. Address questions to [email protected].

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