Employers’ Delay Tactics in Fixed-Term Contract Terminations: Time to Invoke Section 8(2) of the Employment Standards Code.

Imagine losing your fixed-term job and being told your employer doesn’t have to pay you because you were lucky enough to find another one.

In recent times, a troubling practice has continued to emerge among some Alberta employers when dealing with employees on fixed-term contracts. The pattern is simple—but deeply unfair. Upon early termination of the fixed-term contract, instead of paying the employee the full compensation owed for the remainder of the term, these employers deliberately withhold payment. They wait, often for weeks or even months, until the employee has secured new employment—then claim that no compensation is owed, arguing that the employee was “fortunate” to find another job. Alternatively, they contend that even if compensation is payable, any income earned during the interim period must be deducted from the amount owing.

They base their position on the doctrine of mitigation of damages, which requires a wronged party to take reasonable steps to minimize their losses. But in the context of fixed-term employment contracts, this reasoning is flawed, and, in my view, inconsistent with Alberta’s Employment Standards Code, RSA 2000, c E-9. At common law, when an employer terminates a fixed-term employment contract without just cause or an enforceable early-termination clause, the employee is entitled to the balance of the contract—the wages and benefits that would have been earned had the contract been performed. This principle is well-established in cases such as Howard v. Benson Group Inc. (2016 ONCA 256).

The Legislative Safeguard: Section 8(2) of the Employment Standards Code

Section 8(2) of the Code states in unequivocal terms:

“An employer must pay an employee all wages, overtime pay, general holiday pay, and vacation pay owing to the employee within 10 consecutive days after the end of the pay period in which termination occurs, or within 31 consecutive days after the last day of employment, whichever is earlier.”

This provision is not a suggestion—it is a statutory obligation. It was reinforced in legislative amendments in 2020 to curb the exact kind of abuse now resurfacing: employers delaying or withholding payment of lawful entitlements in order to leverage the mitigation argument later.

The legislature has done its part by imposing this payment timeline. If an employer fails to comply, they are in breach of statute; and when they breach the statute, it is difficult to see how they can later benefit by claiming a reduction in damages due to mitigation.

Some legal scholars argue that a fixed-term employee’s entitlement to payment for the unexpired portion of the contract upon early termination arises from the common law of contract rather than from statute. On that view, section 8(2) of the Code would not apply to fixed-term agreements. However, whether that position is legally sustainable remains open to serious debate.

Let’s unpack it clearly and rigorously. No doubt, the right of a fixed-term employee to be paid for the remainder of the contract upon early termination is a common law contractual right, not a statutory one. However, although the entitlement to the balance of the contract is grounded in common law but the same is preserved by s. 3(1)(b) of the Code.

https://www.canada.ca/content/dam/canada/employment-social-development/migration/documents/documents/Acts/e09.pdf

Section 8(2) of the Code does not create entitlement—it creates a payment deadline for wages and payments owing at termination.

• The section is mandatory: “An employer must pay… within 10 days after the pay period or 31 days after the last day of employment, whichever is earlier.”

Section 8(2) governs the deadline to pay amounts owed at termination, regardless of whether the entitlement comes from statute or common law.

Do fixed-term contract damages have to be paid within s. 8(2) timelines?

It is my opinion that where compensation represents wages or earnings payable because of the termination, they constitute “wages owing” and therefore fall within the payment timeline prescribed by s. 8(2). This conclusion follows for three reasons:

• The employee’s substantive entitlement to the unpaid remuneration arises under the contract and the common law, rights which are preserved by s. 3(1).
• Section 8(2), however, governs the employer’s statutory obligation to pay all wages owing within the prescribed 10- or 31-day period following termination.
• The Act does not extinguish or diminish the common law measure of damages; it merely regulates the timing of payment once those amounts become owing.

So, the two sections operate together, not in conflict:

A fixed-term employee terminated early is entitled at common law to payment for the remainder of the contract. S. 3(1) preserves this right, and that amount must be paid within the statutory termination payment deadlines set out in s. 8(2).

Why the Current Court Approach Fails Employees

Litigation is rarely swift. In Alberta, wrongful dismissal and breach of employment contract claims can take months —sometimes years —to resolve. By that time, the unlawfully dismissed employee has almost certainly secured other job. Under current court interpretations of mitigation, those subsequent earnings by the dismissed employee can be deducted from the damages award—even when the employer unlawfully withheld the original payment in the first place.

This approach effectively rewards employers for ignoring their statutory obligations. They gain a financial advantage by breaking the law, waiting out the litigation process, and then pointing to the employee’s later income to justify paying less. The failure to pay within the statutory window is not merely a contractual breach; it is a statutory violation.

If an employer breaches that statutory requirement and withholds payment, knowing fully well that the employee will likely secure other employment before litigation concludes, it should follow that:

1. The employer has forfeited any right to rely on mitigation arguments for failing to comply with s. 8(2); and,
2. The employee’s entitlement should be calculated as if payment had been made within the timeline prescribed by the code.

The Need for Judicial Reconsideration

The Alberta Legislature has provided the statutory mechanism to prevent this abuse by employers. Unfortunately, the Alberta courts have not consistently enforced this safeguard in a way that protects employees. Judicial reasoning should align with the legislative intent: employers who breach s. 8(2) should not profit from that breach through mitigation deductions years later.

It is time for Alberta’s judiciary to take judicial notice of s. 3(2) and s. 8(2) of the Employment Standards Code and apply it rigorously in fixed-term contract disputes. Failing to do so leaves employees at the mercy of employers who are willing to exploit procedural delays and the realities of job-seeking to reduce lawful entitlements.

Why Section 8(2) Matters for Litigation Strategy

If properly invoked, section 8(2) can neutralize the employer’s mitigation argument. Here’s why:

1. Once the statutory deadline passes, the wages are “owing” and should have been paid.
2. The employer, having unlawfully withheld payment, cannot then rely on the employee’s subsequent earnings to reduce its liability.
3. To allow such a deduction would reward the employer for breaching a clear statutory duty.

This reasoning aligns with the equitable principle that a party cannot benefit from its own wrongdoing. When an employer breaches section 8(2) by delaying payment beyond the prescribed period, it should be estopped from asserting mitigation to reduce damages for that same breach. Plaintiffs’ counsel should therefore begin framing section 8(2) as part of the claim narrative: the employer’s statutory duty to pay within 10/31 days was breached, and that breach itself forecloses any subsequent mitigation defence.

Conclusion

The employment bar has long treated mitigation as a cornerstone of contractual damages. However, mitigation presupposes that the employer’s payment obligation arises purely at common law. Where s. 8(2) of the Employment Standards Code applies, the legislature has imposed a statutory deadline for the payment of wages owing upon termination.

If amounts properly characterized as wages are not paid within that statutory window, the employer’s failure is not merely a breach of contract — it is a statutory violation. An employer who deliberately withholds payment in order to await the employee’s re-employment and then invoke mitigation arguably seeks to benefit from its own breach of the Code.

In such circumstances, principles of statutory interpretation and equitable estoppel militate against permitting the employer to rely on mitigation consequences that flowed from its failure to comply with a mandatory payment provision.

Sections 3(1) and 8(2) are not in tension. Section 3(1) preserves contractual entitlements; s. 8(2) regulates the timing of their payment. Read together, they operate as a shield against strategic delay. The statutory remedy already exists. What remains is for terminated employees—and their counsel—to invoke it with precision.

Ugo Osakwe

Ugo Osakwe helps you navigate the turning points of life.

Contact Ugo at (403) 527-4411 or at uosakwe@pritchardandco.com