In McGuinty v. 1845035 Ontario Inc., 2019 ONSC 4108, Justice Gordon awarded $1,274,174.83 in damages to an employee who had been constructively dismissed. The employee was employed pursuant to a ten-year, fixed-term employment contract that did not contain an early termination provision. After only one year of employment, the employee claimed that he had been constructively dismissed.

After seven days of trial, the Court found that the employee had in fact been constructively dismissed because the employer: (1) took away the employee’s company vehicle; (2) recruited the employee’s subordinate to track the employee’s time; (3) failed to pay the employee commissions to which the employee was entitled; and (4) changed the locks to the premises without notice to the employee. In the absence of a termination provision, the Court concluded that the employee was entitled to receive all compensation payable for the nine years remaining in the employee’s fixed-term employment contract.

This case serves as a painful reminder that employers must be cautious when using fixed-term employment contracts, even when the employer has no intention of actually terminating the employee’s employment during the term. Specifically, if a fixed-term employment contract does not include an enforceable provision for early termination (in accordance with the Ontario Employment Standards Act, 2000):

  1. the employer must provide the employee with all compensation and benefits to the end of the contract term; and
  2. the employee has no obligation to mitigate his/her damages in the event that his/her employment is terminated (or he/she is constructively dismissed) before the end of the term.

Employers should ensure that enforceable termination clauses are incorporated into all employment contracts, both indefinite and fixed-term. Employers should also be sure to seek legal advice before making any changes to the terms and conditions of an employee’s employment.