In today’s job market, finding semi-regular employment can be challenge, and finding permanent employment can be nearly impossible. But what exactly is a “permanent” employment position? Well, it largely depends on how and when the employment agreement can be terminated.

Permanent vs. Temporary

The Merriam Webster Dictionary defines “permanent” as “continuing or enduring without fundamental or marked change”. It defines “temporary” as “lasting for a limited time”. These words clearly describe two entirely different employment arrangements.


A temporary or limited-term employment contract refers to an agreement between an employer and an employee that will apply for a specified period. A permanent employment contract refers to an agreement between the same two parties for an unspecified, indefinite period.

Termination of an Employment Agreement

Because the loss of employment can be very disruptive to a person’s day-to-day living, the law has provided certain employee protections with respect to termination of an employment agreement by an employer.

Employment Standards Legislation vs. Common Law

There are two main sources of Canadian employment law – legislation eg. the Employment Standards Act (Ontario) (the ESA) and the common law, as determined by the courts. The primary distinction between the two sources is that, while the common law has traditionally been very generous to the employee with respect to employment matters, the ESA provides an easily accessible set of minimum standards with which employers must comply. Note that the ESA does not fully apply to all professions. Examples of those not covered by the ESA are lawyers and employees in areas under federal jurisdiction, such as banks, airlines, and post offices. When drafting or reviewing an employment agreement, it is important to know whether or not your area of employment is covered by the ESA, and to check the legislation which applies to you in your jurisdiction.

Source

Termination “For Cause” vs. Termination Not “For Cause”

Temporary employment agreements provide a specific date on which the agreement will terminate.  Permanent employment agreements do not have a specific end date, so for all permanent employment agreements, either the employee, the employer, or both must terminate the permanent agreement. From an employer’s perspective, there are two scenarios under which the arrangement can be severed – “for cause” or not “for cause”.

When an employment agreement is severed “for cause” the employee has committed an offence that justifies termination, and there are no obligations put on the employer.  The employee may be terminated on the spot. (Note that the employment agreement may require a series of warnings before termination, but this blog does not address those types of contractual protections.)

However, where an employment agreement is not severed “for cause”, the ESA has placed certain restrictions on the employer which are meant to reduce disruption to the employee’s life.

The general principle is that, if an employee has been employed for more than 90 days, that employee is entitled to adequate notice of termination. The amount of notice to which an employee is entitled depends on the length of time employed. In Ontario, the employee is entitled to 1 week of notice per year employed by the employer, up to a maximum of 8 weeks. Employers also have the option of payment in lieu of notice, wherein the employer may pay the employee’s weekly salary times the number of weeks of notice required as a lump sum, instead of giving notice. 

Note that “probationary periods” are the exception to the above. Under the ESA (Ontario), an employer may include a probationary period in the employment agreement. During this period, which can be for a maximum of 90 days under the ESA, the employer may terminate the contract at any time without cause.

Source

It is worth repeating that the above ESA requirements are floors, not ceilings. These are minimum requirements that must be met, and many employers will choose to exceed these requirements.

When drafting and reviewing an employment agreement, it is important to carefully review the termination clauses as well as the renewal clauses. If your contract is temporary, and expires on a certain date, but is in fact continually renewed, this employment contract could be classified as a permanent position – thus attracting the protection of the ESA or similar applicable legislation.

 

Legal document libraries such as Clausehound’s Small Business Law Library can help to ensure that you have the termination clauses and renewal clauses appropriate for your circumstances.

 

This blog was co-authored by Samita Pachai.

 

–  –  –

This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.