Contributor, Geoff Mason.
School’s (almost) out for summer, and BC business owners are gearing up to hire students for the season. As such, we thought it timely to offer some tips on seasonal employment to employers and employees both, with a special emphasis on creating sustainable workplace relationships.
Over the next few weeks, we will be blogging about some of the key things to consider when it comes to temporary employment. In today’s post, the first in a 5-part series, we focus on the risks, benefits and alternatives to using fixed-term contracts for seasonal workers.
A fixed-term employment contract is one that sets out how long the employment relationship will last and when exactly it will end. Such contracts make sense where an employee is hired to complete a specific project or fill a maternity leave position. Employers also tend to use them when hiring a worker on a temporary basis, such as for summer employment.
The key advantage to such contracts for business owners is that when the employment ends on the date specified, they won’t owe the employee any severance (or notice of termination).
What are the risks?
However, there are also potential risks to using fixed-term contracts for seasonal workers. Crafting a valid fixed-term contract is not as straightforward as it sounds. Depending on the wording of the contract and the surrounding circumstances, such contracts may be unenforceable, leaving the employer liable for much more severance than it expected. Keep in mind:
- Ambiguity. Because an employee is usually forfeiting their right to notice or severance in a fixed-term contract, courts require very clear evidence that both parties intended the contract to be for a fixed-term. If the contract is at all ambiguous on the issue of the length of employment, a court may consider it to be an indefinite contract, leaving the employer potentially liable to pay severance. This is true even if the contract includes a “severance-limiting” clause, as that clause will be unenforceable along with the rest of the contract.
- Deemed “continuous employment”. Fixed-term contracts can be particularly risky when it comes to hiring returning seasonal employees. If an employee has worked for the business for more than one consecutive summer, they may be considered “continuously employed” under the law. In these cases, the employee may have a claim for severance at the end of the so-called fixed-term contract – and if asked to hear such a claim, a court may also consider the employee’s entire employment history with the employer in deciding how much severance is owed.
- Working past the termination date. If an employee remains employed past the contract’s end date, the court may view the contract as indefinite, again giving rise to a potential severance claim.
What’s the solution?
There’s no reason to fear a fixed-term contract. If you want to create an employment relationship that doesn’t give rise to a notice or severance right – which is completely appropriate given the short-term nature of the work, so long as both parties understand this – a fixed-term contract is the way to go. Just be mindful of the risks and have an employment lawyer draft or review the contract before it’s signed.
Your other option is to use a contract of indefinite term, i.e. one without a specific end date. This avoids the risks described above, but means you will have to give your employee notice of termination or severance. To limit these obligations, include a clear, well-drafted severance limiting clause that entitles the employee only to the minimums set out in the Employment Standards Act. Again, make sure to have this clause reviewed by an employment lawyer.
Both options are consistent with the principles of sustainable employment. An employment contract that is clear, transparent and fair creates certainty for both employer and employee from the outset of their relationship. It’s a win-win.
For Part 2 in this summer employment series, Young Employees, click here.
Have a question about seasonal or other temporary employment? Contact us!
NOT LEGAL ADVICE. Information made available on the Kent Employment Law website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action, based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. One of our lawyers would be pleased to discuss any specific legal concerns you may have.