Can Fixed-Term Employment Become an Indefinite Hiring? The Quebec Court of Appeal says "Yes".

A recent decision of the Quebec Court of Appeal in Atwater Badminton and Squash Club Inc. c. Morgan (French version only) ("Morgan")  should serve as a reminder to employers that the form of an employment relationship cannot dictate the reality of the situation.  In Morgan, the employee was a badminton professional who had been retained by the Club over the course of 17 years on a series of fixed-term contracts, ranging from 9 months to 3 years in duration.  For a period of four years (1998-2002), the employee did not have any written contract at all, but continued working as a pro.  Several years after a change in ownership of the Club, the employee was advised that his contract would not be renewed beyond its expiry date (August 31, 2010).  The employee sued for the equivalent of 'wrongful dismissal' under the Quebec Civil Code, alleging that he should receive an indemnity equivalent to 21 months' pay in lieu of notice because his employment had been of an indeterminate nature.  The employer argued that the employee had no such entitlement, as he was employed for a fixed term, and his contract had simply expired.

A Justice of the Quebec Superior Court had agreed with the employee, finding that the parties' conduct indicated a common intention that his employment be of an indeterminate nature.  The employee's contract was frequently renewed, sometimes after the prior contract had already expired and with only brief, informal discussion of the terms of renewal.  The employee had even worked for 4 years with no written contract of any kind.  Based on these facts, it appeared to the Judge that the parties had intended the relationship to continue indefinitely, despite the fixed-term form of the agreements that documented that relationship.

In a relatively brief decision, the Quebec Court of Appeal upheld the reasoning of the trial judge with respect to the effect of a series of virtually uninterrupted term contracts, and affirmed the award of a 21-month indemnity to the employee.

While the decision in Morgan emanates under the civil law of Quebec, employers throughout the common law jurisdictions in Canada (including Ontario) would be well served to remember the lesson, as well:  despite the formalities of a fixed-term arrangement, the common law courts will also look to the substance of a relationship to determine whether it is for a definite or indefinite duration.  Where term contracts are frequently and routinely renewed, with little or no negotiation, or if the parties maintain their relationship despite the expiry of the agreement, the employment will take on the contours of an indefinite hiring.  As a consequence, despite the "expiry" of an agreement, ending the relationship could expose the employer to a claim for reasonable notice of termination (or, more likely, payment in lieu thereof). 

Confused about how to manage fixed-term arrangements?  Have questions about how to mitigate the risk?  Feel free to contact Lance Ceaser for assistance.