At a time when employees are regularly presented with contracts containing end dates upon their hiring, distinguishing between fixed term and indeterminate contracts is of particular relevance and importance for employers in Quebec. Many employers are surprised to learn that employment contracts stipulating fixed end dates are not necessarily contracts of determinate duration, but rather qualify as indeterminate contracts. This has important implications, given that fixed term contracts simply expire upon arrival of the term, effectively ending the employment relationship between the parties without any further formalities or obligation to provide notice. Employers wishing to terminate indeterminate contracts, on the other hand, must provide reasonable notice as required by the Act Respecting Labour Standards and the Civil Code of Quebec. This may prove costly.
Classifying your employment contract
While classifying a contract as fixed term or indeterminate involves a case-by-case analysis of the contractual provisions and conduct of the parties in order to determine their intentions, being aware of the relevant criteria applied by the Quebec Courts is useful to ensure that the employer’s intentions are not disturbed as a result of drafting errors or inconsistent conduct.
It is important to note that contracts are presumed to be indeterminate unless proven otherwise, and it is up to the party claiming a fixed term contract to prove the same. Employment contracts that contain a fixed term but also provide the employer with the ability to terminate the contract at any time before the completion of the term with or without notice, will support a finding that the contract is of indefinite duration given that the ability to terminate at any time is characteristic of this type of contract.
Fixed term contracts could become indeterminate
Employers should also be aware of the possibility for fixed term contracts to transform over time into contracts of indefinite duration. This notably tends to happen where an employer has repeatedly renewed a series of subsequent fixed term contracts under the same or similar conditions. A better strategy for ensuring that fixed term contracts are upheld is to draw a connection in the contract between the term and particular activities of the business, for example by specifying that the employment relationship will terminate upon the completion of a specified project.
In addition, under Article 2090 of the Civil Code of Quebec, employment contracts are effectively renewed for an indeterminate term where the employee continues to work for five days after the expiry of the term without objection from the employer.
Employer conduct before and after a contract renewal
Beyond the evident importance of careful contractual drafting, the jurisprudence also highlights the relevance of the parties’ conduct throughout the employment relationship. In Vissa c. AECOM Consultants inc., (2017 QCCS 1818), the Court relied heavily on the objective of the negotiations and the behaviour of the parties following the signing of the employment contract in order to determine that it was of fixed duration. The fact the employee renegotiated the employer’s proposed end date clearly indicated that the employee was aware of the term and fully expected that the contract would terminate on the specified date. If the contract was truly one of indefinite duration, as the employee claimed, he would have had no interest in negotiating the end-date so forcefully given that it would have no significance in the context of a contract of indeterminate duration. Employers should also be aware, however, that engaging in conduct which suggests to an employee that the employment contract will be renewed prior to or upon expiry of the term may support a finding that the relationship between the parties was meant to be more permanent than the fixed term in the contract would suggest.
While fixed term contracts may be appropriate in certain circumstances, employers wishing to avail themselves of this type of contract must exercise caution in their formation. Failure to do so may result in employers being committed to their employees for longer than anticipated or result in reasonable notice obligations.