Fixed‑term employment contracts are designed to start and end on specific dates. In theory, they expire automatically. In practice, questions often arise about what happens when an employer ends a fixed‑term contract early or what happens when an employee continues to work after the contract expires and nothing new is signed.
If a fixed‑term contract ends early, the general rule is that the employee can claim what they would have earned to the end of the term. However, it’s not always so simple.
The same is true for if an employee keeps working past the end date without a new agreement. In these circumstances, the wording of the contract becomes essential. Vague or incomplete terms can lead to expensive surprises for employers.
Here are a few questions employers should ask when dealing with fixed-term contracts:
- Is the Contract Actually “Fixed-Term”?
A “fixed‑term” label is not always enough. Courts will look at the substance of the contract, and how the employment relationship operated in practice. Where the contract does not clearly demonstrate that the employment relationship was set to end on a particular date, it may be treated as indefinite, regardless of the label used.”
For example, in Ceccol v Ontario Gymnastic Federation (204 DLR (4th) 688), (cited by Alberta courts) the Court of Appeal for Ontario held that the characterization (between fixed -term and indefinite) depends on the wording of the contract and the surrounding circumstances. If the end date is vague, conditional, or tied to renewals/reviews, a court may find no clear agreement that the employment should end automatically. In such a case, termination may trigger statutory notice under the Employment Standards Code (the Code) or, potentially, common law reasonable notice.
- Has the Relationship Become Indefinite Over Time?
Fixed‑term contracts can lose their character through repeated renewals.
In Koutsikaloudis v. Maple Leaf Academy (2021 ABPC 136), the Alberta Court of Justice found that an employee who had worked for approximately 18 years under consecutive one‑year contracts was, in substance, an indefinite employee. The Court relied on the employer’s representations, the expectation of ongoing renewal, and the employee’s length of service. As a result, the Court assessed notice on a common law basis rather than enforcing the fixed‑term structure.
- Is the Code Clearly Incorporated?
Courts may enforce early‑termination clauses that clearly and unambiguously limit entitlements to Code minimums, even in fixed‑term contracts.
In Hebert v. Colin’s Mechanical Service Ltd. (2025 MBKB 87), the Court enforced a four‑year fixed‑term contract that allowed termination without cause at any time, provided notice or pay in lieu complied with the Code. In this case, because the parties had clearly agreed to set entitlements to statutory minimums, the employee was not entitled to the balance of the term.
- Does the Contract Exceed 12 Months?
Under section 55(2)(c), the Code imposes notice obligations in certain fixed‑term contexts, including contracts exceeding a duration of 12 months. In these situations, courts have required that an employee be provided termination notice pursuant to the Code.
Key Takeaways
Employers should keep in mind that fixed‑term contracts demand careful drafting. A termination clause that works well in an indefinite relationship can cause costly issues in a fixed-term arrangement. If you have questions, feel free to reach out to the employment team at DWF (Alberta) LLP!
