Fixed-Term Contract Signed After Several Years of Regular Employment is Enforceable

February 2016

Article by: Julie Menten

Previously printed in the LexisNexis Labour Notes Newsletter.

In a recent case, Riskie v. Sony of Canada Ltd., 2015 ONSC 5859, an Ontario court considered whether an employee was owed reasonable notice for the entire length of his 26 years of employment when the employer did not renew a fixed-term contract signed in his last year of employment.

Facts

Brent Riskie had been a valued and highly paid executive in Sony’s Toronto office for several years. In April 2014, he told his employer that he and his family would be moving to Ottawa. The trial judge found Mr. Riskie had three choices at that point. He could have remained in Toronto despite his family’s move; commuted between Ottawa and Toronto; or resigned from his employment.

Mr. Riskie made an alternative proposal. He offered to work from home, telecommute and come to Toronto regularly. The employer’s president and CEO was firmly opposed to this proposal but, with the support of a senior vice president to whom Mr. Riskie reported, the employer agreed to the arrangement. This was, however, on the condition that it be the subject of a fixed-term contract.

The employer drafted such a contract prior to Mr. Riskie’s move. He expressed strong disagreement to a number of terms. He successfully negotiated changes to some of the terms, such as the end date, but not others, such as a right to a renewal of the contract unless he failed to prove himself.

Mr. Riskie signed the contract on which the parties agreed in July 2014. The trial judge found that the terms of the fixed-term contract contained material and adverse changes to the terms of Mr. Riskie’s employment. Mr. Riskie, however, testified that he was fully aware that he had become a fixed-term employee but hoped he would be able to persuade the employer to make the temporary accommodation permanent.

During the term of the fixed-term contract, changes were made to the employer’s North American operations, resulting in the loss of several positions. Mr. Riskie was told in February 2015 that his contract would not be renewed. He was paid all of his minimum statutory severance and termination entitlements.


 

Decision

Mr. Riskie brought an action in wrongful dismissal on the basis that the fixed-term contract was unenforceable because it was signed under duress and not supported by consideration.

The trial judge found that there was ample consideration to support the validity of the contract; it was Mr. Riskie who sought to make significant modifications to his contract by moving to Ottawa. The employer only agreed to accept Mr. Riskie’s proposal with alterations to his contract.

In addition, the trial judge concluded this was not a case of duress. While there was no doubt that rejecting the employer’s proposed contract would have resulted in an outcome not preferred by Mr. Riskie, i.e. a return to Toronto or resignation from employment, “not having a preferred option available is not the test for duress”. The employer, the trial judge noted, had no obligation to accommodate Mr. Riskie’s move to Ottawa and had every right to propose the terms on which it might do so. There was nothing coercive about attaching conditions to the employer’s accommodation of Mr. Riskie’s proposal.

Mr. Riskie also argued that the “term” provision of the fixed-term contract, which permitted either party to terminate the contract with 30 days of prior written notice, breached the minimum standards of the Employment Standards Act, 2000 (the “ESA”) and thus had to be struck in its entirety from the contract, with the result that the contract reverted to an indeterminate term and could only be terminated with reasonable notice.

The trial judge rejected the employer’s argument and agreed that Mr. Riskie was continuously employed from when he was hired in 1989. The early termination clause thus violated the minimum standards of notice required by the ESA. The trial judge did not, however, accede to Mr. Riskie’s argument that this necessitated the striking out of the entire “term” provision from the contract. He concluded that the rest of the fixed-term provision, which provided for the ultimate termination date of the contract, was not null and void. Mr. Riskie’s claim for wrongful dismissal was thus dismissed.

Takeaway for Employers

  • When considering these sorts of requests from employees, a fixed-term contract may be a useful tool, as it permits the employer to “try out” the accommodation to ensure it is meeting the employer’s needs. In this case, the employer was able to impose materially different terms than the terms contained in the employee’s original contract. It is important to note that this was not a case of human rights discrimination – there was no legal duty for the employer to accept Mr. Riskie’s proposal.
  • Employers will want to ensure that the employee has had an opportunity to review the proposed fixed-term contract prior to signing. The trial judge did not find duress in this case partly because Mr. Riskie was afforded every opportunity to seek advice if he chose to do so.
  • To reduce the potential for liability, employers will need to ensure that the early termination provision does not violate the minimum standards of the applicable employment standards legislation, as the fixed-term contract may not interrupt the continuous nature of the employee’s employment. While the trial judge here did not sever the entire “term” provision but only the offending words, there is case law to support the opposite conclusion.