Fixed-Term Employment Contracts: Are They Worth The Risk?

Employers often hire employees pursuant to fixed-term contracts in order to avoid common law reasonable notice obligations and other perceived liabilities. However, this practice can unnecessarily expose employers to more costly legal liabilities that can be avoided through the use of indefinite-term contracts containing early termination provisions setting out minimal notice of termination.

The first danger to employers stems from the common law legal principle which holds that when terminating a fixed-term contract which does not contain an early termination clause, the measure of damages is not the common law reasonable notice period. Rather, the employee is entitled to the balance of the wages due for the remainder of the contract's term, subject to the employee's duty to mitigate.