April 29, 2016

By Brad Smith

In Bowes v. Goss Power Products Ltd. the Ontario Court of Appeal held that when an employee and employer agree to a specific period of notice and do not state the employee has a duty to mitigate, the employee does not have a duty to mitigate.

On April 8, 2016 the Ontario Court of Appeal extended this principle to contracts of employment for a fixed term. In Howard v. Benson Group Inc. (The Benson Group Inc.) the employee and employer entered into a contract of employment for 5 years. After 23 months, the employer terminated the employee. The employee argued he was entitled to payment for the remainder of his 5 year contract. The Court of Appeal agreed and stated:

“In the absence of an enforceable contractual provision stipulating a fixed term of notice, or any other provision to the contrary, a fixed term employment contract obligates an employer to pay an employee to the end of the term, and that obligation will not be subject to mitigation.”

This case is important because it highlights the risk of entering into a fixed term contract without considering all risks. The employer could have avoided the result if it had specified a pre-determined notice period. This drafting error or omission was very costly to the employer.

Generally employers draft the employment contract. It is best that employers review the language in their employment contracts to ensure it specifies there is a duty to mitigate and the employer has a right to terminate without cause upon a pre-determined notice period or pay in lieu of notice.