A fixed-term contract in Ontario is a high-stakes document. If it lacks a proper early-termination clause, the employer owes the full balance of the term on termination without cause — a principle confirmed in Howard v. Benson Group Inc., 2016 ONCA 256. If the termination clause is defective, the same result often follows. Before you sign, look hard at how the term ends, whether minimum ESA standards are preserved, and whether the contract silently converts to indefinite employment.
What is a Fixed-Term Employment?
An Ontario fixed-term employment contract is an employment agreement for a specified duration (e.g. '18 months ending 31 December 2027') that generally terminates by effluxion of time. It is governed by: the Employment Standards Act, 2000 (ESA); the common law of wrongful dismissal (including the Waksdale v. Swegon doctrine voiding non-compliant termination clauses); the Human Rights Code (RSO 1990, c. H.19); the Occupational Health and Safety Act; and the Pay Equity Act where applicable. Under Howard v. Benson Group Inc., fixed-term contracts terminated early without a valid early-termination clause entitle the employee to the balance of the term without a duty to mitigate.
Red flags to watch for
Without one, Howard v. Benson Group Inc. (2016 ONCA 256) means the employer owes full compensation to the end of the term if they terminate early — and the employee has no duty to mitigate unless the contract says so.
Under Waksdale v. Swegon North America Inc. (2020 ONCA 391), a single ESA-non-compliant termination provision voids the entire termination framework — reverting to common-law or fixed-term balance-of-term damages.
The ESA (Reg 288/01) permits no-notice termination only for 'wilful misconduct, disobedience or wilful neglect of duty.' Broader 'just cause' language in a termination clause can void the provision.
Rolling fixed-term contracts (Ceccol v. Ontario Gymnastic Federation) can be treated as indefinite-term for notice purposes. This affects termination entitlements.
Non-competes are now banned for most employees under the Working for Workers Act, 2021. Even permitted restrictive covenants must be reasonable in duration and scope for a short fixed term.
If a bonus or commission is earned by the end of the term, silence on pro-ration or crystallization can favour the employer in disputes.
Employees with 5+ years' service and employers with $2.5m+ payroll may owe statutory severance under ESA s 64. Fixed-term contracts should address this explicitly.
Your legal rights
Ontario employees in fixed-term contracts are protected by: the Employment Standards Act, 2000 (SO 2000, c. 41), including ss 54-65 on termination and severance, and Reg 288/01 on the 'wilful misconduct' exception; Howard v. Benson Group Inc., 2016 ONCA 256 on balance-of-term damages; Waksdale v. Swegon North America Inc., 2020 ONCA 391 on void termination clauses; Ceccol v. Ontario Gymnastic Federation on rolling fixed-term treatment; the Human Rights Code (RSO 1990, c. H.19) prohibiting discrimination; the Occupational Health and Safety Act (RSO 1990, c. O.1); the Working for Workers Act, 2021 (banning non-competes for most employees); and the Pay Equity Act where applicable. Disputes go to the Ministry of Labour, the Human Rights Tribunal of Ontario, or the Ontario Superior Court of Justice.
Questions to ask before you sign
- 1What is the exact end date of the fixed term, and is there any auto-renewal mechanism?
- 2Can the employer terminate early, and if so on what notice and pay?
- 3Does the termination clause comply with ESA minimums in every conceivable scenario?
- 4What is the 'cause' standard — does it meet the ESA 'wilful misconduct' threshold?
- 5How will bonuses, vacation, and benefits accrue through the term?
- 6Are there restrictive covenants that survive the term, and are they enforceable under the Working for Workers Act?
- 7What happens if the role continues beyond the term without a new contract?
- 8Has ESA severance (s 64) been addressed for longer fixed terms?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.