The Ontario Superior Court of Justice has issued another warning to employers who enter into fixed-term contracts with their employees.
Background
In Tarras v. The Municipal Infrastructure Group Ltd.,[1] the employee was a former owner of The Municipal Infrastructure Group Limited (“TMIG”). In December 2019, the employee’s interest in TMIG was sold to T.Y. Lin international Canada Inc. by way of a share purchase transaction.
In connection with the transaction, the employee entered into a three-year fixed-term employment contract with TMIG. However, the employee was dismissed by TMIG on a “without cause” basis just 13 months into the term. In doing so, TMIG relied on the following early termination clause in the employee’s contract:
TMIG may terminate Employee’s employment in it’s sole discretion for any reason whatsoever without Cause or upon expiry of the Term, by providing Employee with notice of termination, or payment in lieu thereof, or a combination of both, and severance pay, if applicable, pursuant to the Ontario Employment Standards Act, 2000.
The early termination clause also provided for benefits continuation during the statutory notice period, as well as the payment of accrued and outstanding salary and vacation pay.
Nevertheless, the employee commenced an action for damages against TMIG.
Decision
The Court held that the early termination clause was void and...
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