Employers: Be Mindful Of Possible Unenforceable Termination Clauses In Fixed-Term Contracts

In Tarras v. The Municipal Infrastructure Group Ltd., the Ontario Superior Court of Justice held that an unenforceable termination provision entitled the terminated employee to payment of the balance of a fixed-term contract. The employee was awarded, amongst other entitlements, over $400,000 in damages.

The Facts

The Plaintiff was a professional engineer and a former owner of the Defendant employer, The Municipal Infrastructure Group Limited ("TMIG"). The Plaintiff's interest in TMIG was sold by way of a share purchase transaction. In connection with the transaction, the Plaintiff negotiated a three year fixed-term employment contract with TMIG (the "Agreement"). The Agreement was drafted with participation of the Plaintiff and included provisions for early termination of the fixed-term.