In Makela v. Horizon School Division No 67, 2019 ABQB 974, Master J.T. Prowse of the Alberta Court of Queen’s Bench dismissed an employee’s claim for wrongful dismissal arising out of a fixed-term employment agreement. While this case ultimately had a happy ending for the employer, Makela provides a warning for yet another potential pit-fall of fixed-term employment agreements. Read An employer’s guide for what NOT to do: Ruston v. Keddco Mfg. (2011) Ltd.
In Makela, the Plaintiff was employed under a series of fixed-term agreements, first for one year, then for two years and finally, for five years. With just under two months left in his five year agreement, the Plaintiff was given notice his employment would terminate at the end of his fixed-term; this notice complied with the Plaintiff’s notice entitlements under the Alberta Employment Standards Code (the “Code”). The Plaintiff’s agreement had a termination provision, which provided that the Plaintiff would receive one year’s notice or the remaining time left in the agreement, whichever was less.
The Plaintiff argued that the termination provision could have allowed for a notice period less than that required by the Code, and thus should be unenforceable. Master Prowse focused his analysis on the Plaintiff’s claim for common law damages, finding that, even if the agreement’s termination provision was void, the “…fixed-term contract itself served as a form of reasonable notice.” (paragraph 22)
Sections 55 and 56 of the Code require fixed-term agreements of more than one year to be terminated on statutory notice or with pay in lieu thereof. Master Prowse notably did not rule on whether the potential violation of the Code’s notice requirements rendered the termination clause void. Master Prowse’s finding that, at common law, the fixed-term of the agreement provided sufficient notice to meet the employer’s common-law notice obligations, could suggest that damages in such a case may be limited to the statutory notice an employee ought to have received. However, until we have clear guidance on this point Makela serves as a reminder that best practice is to provide statutory notice of termination for fixed-term agreements.
Practically speaking, Makela’s key takeaway is that, where fixed-term agreements are used, Employers and HR departments should ensure to diarize key date reminders for the provision of statutory notice of termination.