You are here
Court Finds Fixed Term Contract Despite the Absence of a Written Agreement
Readers who have known me [Michael Weiler] over the years will know I have one constant theme—employers should get enforceable written agreements for all employees and even “contractors”. In that way the chances of expensive and time consuming litigation will be in most cases eliminated (I say ‘in most cases’ because as the case of Miller v. Convergys CMG Canada Limited Partnership (leave to appeal to the Supreme Court of Canada denied) demonstrates, even a well drafted employment agreement can be challenged.) But employers continue to avoid the up-front effort of getting written agreements and therefore it is not surprising that there continue to be court cases involving the termination of employees.
In a recent case, James v The Hollypark Organization Inc. 2016 BCSC 495, the Supreme Court of British Columbia found that the employer was bound by a fixed term contract which greatly increased the employee’s damage claim upon termination. What is unique about this case is that the parties did not have a written employment agreement.
The Plaintiff Ms. James had been employed in Vernon, B.C. as the general manager of a Marriott hotel. Her experience included both opening and operating a new hotel. Ms. James retired and shortly thereafter the defendant, who had owned a Super 8 motel in Vernon, decided to upgrade their holdings and entered into a contract with Marriott. It then commenced building the new hotel which opened in 2013.
In the spring 2012 the Defendant hired Ms. James to work as general manager of the new hotel and assist in opening. No formal written agreement was signed. Ms. James was terminated August 26th 2013. Ms. James alleged she was hired to act as general manager of the hotel on a fixed one-year term contract to operate the new hotel upon opening and claimed damages for that period. She maintained that on the basis of a conversation that took place in August 2012 the parties agreed to this one year term. The Defendant denied a fixed term agreement had been reached and argued her damages were limited to a short period of notice.
The Court summarized the law regarding fixed term contracts as follows:
 Where termination of employment occurs in the context of a fixed-term contract, the damages assessed will be calculated based on the unexpired portion of the term. The plaintiff will generally be paid the entire balance of the contract, less any deductions for work the plaintiff could reasonably be expected to earn from other employment: Nevin v. British Columbia Hazardous Waste Management Corp. (1995), 129 D.L.R. (4th) 569 at para. 18 (B.C.C.A.).
 The onus is on the plaintiff to prove, on a balance of probabilities, that her employment contract was for a definite term: Herold v. Marathon Developments Inc./Societe Developpement Marathon Inc., 1999 CarswellBC 863 at para. 6 (WL Can) (S.C.). A fixed-term contract can be created orally: Singh v. The Empire Life Ins. Co., 2002 BCCA 452; see also Ellen E. Mole, Wrongful Dismissal Practice Manual, 2d ed, Vol. 1 (Markham, ON: LexisNexis, 2014) at §1.64.
 In determining whether an employment contract was for a fixed term or an ongoing period, Betton J., in Alsip v. Top Rollshutters Inc. doing business as Talius, 2015 BCSC 1166 at para. 40, cited with approval the summary of considerations set out in Canelas v. People First of Canada, 2009 MBQB 67. That summary is helpful and indicates:
- A fixed-term contract can be in writing or orally made or partly in writing and partly oral. The term may be fixed to a certain time or certain event. However, to be fixed, the intention of the parties must be clearly expressed or necessarily implied;
- The parties must be ad idem as to the term. If only one of the parties inferred the term was fixed, that is insufficient; and
- Whether the parties' agreement was oral or partly written and partly oral – the evidence of the parties’ oral discussions should allow the reasonable observer to conclude the individual at issue was hired for a fixed term. BULLET SYMBOL ●
 I note Newbury J.A., in De Cotiis v. Viam Holdings Ltd., 2010 BCCA 368 at para. 21, pointed to flexibility in the nature of the evidence to prove the oral contract at issue:
 … As G.H.L. Fridman notes in The Law of Contracts in Canada (5th ed., 2006) "[i]n the case of a completely oral contract there is greater flexibility in the nature of the evidence that is admissible to prove the contents of the contract and the meaning of the language used by the parties." (At 440.) This flexibility follows intuitively from the recognition that oral contracts must often be construed without the key interpretive tool used to understand written contracts - the words of the agreement.
The Court noted that the contract was an oral one and as such there was little documentary evidence as to the terms of that agreement. It noted “the parties also have very different views of their meetings, conversations and the ultimate terms of the employment agreement.” [para. 17]. The Court reviewed all the evidence including the meetings, conversations and documents. It relied on, among other things, the Franchise Agreement, the Marriott “Opening Your Hotel Timeline”, emails and other related documents. It found that it was unlikely that Marriott would accept someone else who was not as qualified as Ms. James to manage the hotel. The Court held that although some of the evidence was not definitive one way or the other a consideration of “all of these factors lead to the conclusion the meeting and discussion in August 2012 took place as Ms. James related” and therefore the Court found that “Ms. James had an employment agreement with Hollypark for a fixed term of one year from the date of the Hotel opening.”
Damages were assessed based on the one year fixed term contract and there was no need therefore to determine what reasonable notice might have been in the absence of such an agreement. No reduction was made for a failure to mitigate. She was awarded $53,485.72 as well as 4% vacation pay and special damages of $837.49 related to moving and storage expense. The parties were left to agree on what costs Ms. James would receive failing which they were at liberty to apply (it may well be that Ms. James made a formal Offer to Settle and would have therefore been entitled to significantly greater costs than normal).
Despite the onus on Ms. James to prove the actual terms of the contract she was able to point to evidence that supported her version of what was agreed to in August 2012 in that meeting. The defendant then was found liable for over $50,000 plus it must pay a portion of Ms. James’ legal fees and disbursements. Obviously the defendant had to pay its lawyer for preparing and attending a 3 day trial. The defendant also had to suffer the embarrassment of having their evidence rejected in a formal court decision. It also ran the risk of collateral damage to its reputation and relationship with Marriott.
And consider what would have been the damages if the employee had proven a much longer fixed term contract? She was 65 years old so her chances of finding another job would have been very slim and so damages would have been calculated on the balance of the fixed term period. Add in other claims like stock options, pensions, benefits etc and the damage award could be enormous: see for example Hawkes v Levelton.
All of those costs and aggravations could have been easily avoided if the employer had simply confirmed in a written contract their version of the terms of the agreement and resolved any disagreement with Ms. James at the outset.
I tell my young referees in our officiating clinics “Experience is just how we describe our mistakes” and therefore mistakes are good but only IF we learn from them. Even better is to learn from someone else’s mistake.
About the Author
Michael Weiler practices employment and labour law including human rights and prevention of workplace harassment/bullying and independent investigations; advising on the practical and legal issues affecting private family-owned businesses; and more – see his website at www.WeilerLaw.ca. Michael is a frequent seminar presenter and the assistant editor of Canadian Cases on Employment Law. Michael can be contacted at email@example.com. For those who wish to receive articles, seminar notices and blog comments please contact Carolyn Weiler at firstname.lastname@example.org or call her at 604 336 7427.
This article is for your general information and should not be taken as legal advice. If you have a specific problem, please contact Michael Weiler to discuss your situation. This article was originally posted on September 25, 2016 at mweilerlaw.com.