Examining reasonable expectations in a contract bearing more than one construction
There is a fundamental principle in employment law that “a contract of employment for an indefinite period is terminable only if reasonable notice is given.”
This principle is not absolute but can be rebutted if the employment contract clearly specifies some other period of notice. This principle only applies to employees engaged for an indefinite period. It does not apply to fixed term contracts of employment.
When Diana Ceccol was dismissed from her employment with the Ontario Gymnastic Federation after 16 years of service she brought an action for wrongful dismissal. Her employer took the position that Ms. Ceccol was not employed for an indefinite period, but rather for a fixed term of one year, based on her contract of employment. Because she was on a fixed term, Ms. Ceccol was not dismissed. Her employment simply ceased in accordance with the terms of the contract.
Ms. Ceccol argued that based on the terms of the contract and the fact that the contract had been renewed for 15 consecutive years, her employment was properly characterized as employment for an indefinite period. As such she was entitled to reasonable notice when her employment was terminated.
The trial judge agreed with Ms. Ceccol. He focused on the expectations of the parties in determining the nature of Ms. Ceccol’s employment. He found that Ms. Ceccol and her immediate supervisors believed and acted as if Ms. Ceccol was a full-time permanent employee. As such Ms. Ceccol was entitled to reasonable notice which the trial judge set at 16 months. He then reduced the notice by four months because of Ms. Ceccol’s failure to mitigate her damages.
The Federation appealed the finding of the trial judge with respect to the nature of Ms. Ceccol’s employment and to its obligation to provide her reasonable notice of termination. Ms. Ceccol cross-appealed the finding that she failed to properly mitigate her damages.
The Court of Appeal concurred with the trial judge that the reasonable expectations of the parties were an important consideration. The Court also looked to the employment contract. If the employment contract bears more than one construction, then one must look to the reasonable expectations of the parties to determine which construction of the contract is appropriate.
Article 1.0 of the employment contact set out a term of 12 months for the contract. Article 1.1 specifically contemplated that the contract may operate either shorter or longer than 12 months “...unless sooner terminated or extended as hereinafter provided.”
Article 1.2 stated that the contract was subject to renewal if the employee had received acceptable performance reviews and if the parties agreed to the terms of the renewal. The renewal provision is explicitly linked to the term provision by the words “unless sooner terminated or extended as hereinafter provided.” The renewal was also linked to the performance reviews. Ms. Ceccol was subject to a formal appraisal process and received detailed written appraisals each year.
It was the Court’s view that the relationship between articles 1.1 and 1.2 in the contract was not entirely clear. There was ambiguity surrounding the extension of the contract and therefore the trial judge did not err by considering evidence about the parties’ intentions and conduct relating to the contract. This evidence supported Ms. Ceccol’s position that her employment was for an indefinite period.
Once it was determined that Ms. Ceccol was employed for an indefinite period, the Court considered the employer’s argument that the employment agreement clearly provided for a specific length of notice. They relied on article 5.4 in support of its argument that Ms. Ceccol was only entitled to eight weeks’ notice, not reasonable notice. Article 5.4 provided that the parties to the contract agreed to abide by the Ontario Employment Standards Act and regulations concerning notice of termination of employment. The Act provides for eight weeks’ notice in writing if the length of employment is eight years or more.
Again the Court of Appeal found that the wording of this article was not clear and created uncertainty. Of concern was the fact that several articles dealing with termination (termination with cause, termination of probationary employees and termination by the employee) used clear words such as “may terminate” and “shall have the right to terminate.”
However the article purportedly dealing with termination without cause does not use such clear language. The Court interpreted the contract to read that it only provided for three types of termination: by the employer for cause; by the employer of probationary employees; and by the employee. The contract did not deal with termination without cause.
As the contract is silent with respect to termination without cause, the common-law principle of reasonable notice applies. The Court of Appeal upheld the trial judge’s finding for notice of 16 months (less four for failure to properly mitigate). The appeal was dismissed.
For more information:
• Ceccol v. Ontario Gymnastic Federation, Ontario Court of Appeal, Docket No. CA C31743, Sept. 6/01.
This principle is not absolute but can be rebutted if the employment contract clearly specifies some other period of notice. This principle only applies to employees engaged for an indefinite period. It does not apply to fixed term contracts of employment.
When Diana Ceccol was dismissed from her employment with the Ontario Gymnastic Federation after 16 years of service she brought an action for wrongful dismissal. Her employer took the position that Ms. Ceccol was not employed for an indefinite period, but rather for a fixed term of one year, based on her contract of employment. Because she was on a fixed term, Ms. Ceccol was not dismissed. Her employment simply ceased in accordance with the terms of the contract.
Ms. Ceccol argued that based on the terms of the contract and the fact that the contract had been renewed for 15 consecutive years, her employment was properly characterized as employment for an indefinite period. As such she was entitled to reasonable notice when her employment was terminated.
The trial judge agreed with Ms. Ceccol. He focused on the expectations of the parties in determining the nature of Ms. Ceccol’s employment. He found that Ms. Ceccol and her immediate supervisors believed and acted as if Ms. Ceccol was a full-time permanent employee. As such Ms. Ceccol was entitled to reasonable notice which the trial judge set at 16 months. He then reduced the notice by four months because of Ms. Ceccol’s failure to mitigate her damages.
The Federation appealed the finding of the trial judge with respect to the nature of Ms. Ceccol’s employment and to its obligation to provide her reasonable notice of termination. Ms. Ceccol cross-appealed the finding that she failed to properly mitigate her damages.
The Court of Appeal concurred with the trial judge that the reasonable expectations of the parties were an important consideration. The Court also looked to the employment contract. If the employment contract bears more than one construction, then one must look to the reasonable expectations of the parties to determine which construction of the contract is appropriate.
Article 1.0 of the employment contact set out a term of 12 months for the contract. Article 1.1 specifically contemplated that the contract may operate either shorter or longer than 12 months “...unless sooner terminated or extended as hereinafter provided.”
Article 1.2 stated that the contract was subject to renewal if the employee had received acceptable performance reviews and if the parties agreed to the terms of the renewal. The renewal provision is explicitly linked to the term provision by the words “unless sooner terminated or extended as hereinafter provided.” The renewal was also linked to the performance reviews. Ms. Ceccol was subject to a formal appraisal process and received detailed written appraisals each year.
It was the Court’s view that the relationship between articles 1.1 and 1.2 in the contract was not entirely clear. There was ambiguity surrounding the extension of the contract and therefore the trial judge did not err by considering evidence about the parties’ intentions and conduct relating to the contract. This evidence supported Ms. Ceccol’s position that her employment was for an indefinite period.
Once it was determined that Ms. Ceccol was employed for an indefinite period, the Court considered the employer’s argument that the employment agreement clearly provided for a specific length of notice. They relied on article 5.4 in support of its argument that Ms. Ceccol was only entitled to eight weeks’ notice, not reasonable notice. Article 5.4 provided that the parties to the contract agreed to abide by the Ontario Employment Standards Act and regulations concerning notice of termination of employment. The Act provides for eight weeks’ notice in writing if the length of employment is eight years or more.
Again the Court of Appeal found that the wording of this article was not clear and created uncertainty. Of concern was the fact that several articles dealing with termination (termination with cause, termination of probationary employees and termination by the employee) used clear words such as “may terminate” and “shall have the right to terminate.”
However the article purportedly dealing with termination without cause does not use such clear language. The Court interpreted the contract to read that it only provided for three types of termination: by the employer for cause; by the employer of probationary employees; and by the employee. The contract did not deal with termination without cause.
As the contract is silent with respect to termination without cause, the common-law principle of reasonable notice applies. The Court of Appeal upheld the trial judge’s finding for notice of 16 months (less four for failure to properly mitigate). The appeal was dismissed.
For more information:
• Ceccol v. Ontario Gymnastic Federation, Ontario Court of Appeal, Docket No. CA C31743, Sept. 6/01.
