Canada: Court Of Appeal For Ontario Confirms That Independent Contractors Have A Duty To Mitigate Their Damages

The duty to mitigate was always a clear obligation for employees who had been terminated. However, until a recent Court of Appeal for Ontario decision, there was some confusion as to whether or not this duty extended to independent contractors. In Monterosso v Metro Freightliner Hamilton Inc, Ontario's highest confirmed that this duty does indeed extend to independent contractors.

Facts

The appellants (Metro Freightliner Hamilton Inc.) hired the respondent (Mr. Monterosso) for a 72-month term. Seven months into the contract the appellants fired the respondent. The respondent then sued for the payments due for the remaining 65-months of the contract.

The trial judge found that the contract did not have a termination provision and that it clearly and unambiguously provided for a 72-month term. She awarded the respondent the full amount of the remaining payments.

Issue

Upon appeal, the court considered whether or not the respondent was required to mitigate their damages. The duty to mitigate in the employment context is a common law principle that requires an employee to minimize their losses, or the damages they may have suffered after being terminated. Most commonly, this means that an employee must make reasonable steps to find a new employment. Failing to mitigate may result in a reduction of damages awarded.

Decision

The Ontario Court for Appeal accepted the employer's argument and held that the respondent did in fact have a duty to mitigate their damages, even though they were an independent contractor.

In Metro Freightliner Hamilton Inc. the Court focused on first principles of contract law. Whether an employee or an independent contractor, the duty to mitigate arises when a contract is breached (unless the contract provides otherwise).

Results & Takeaways

In Ontario, both employees and independent contractors have a duty to mitigate their damages upon termination.

As it is the employer's burden at law, to establish failure to mitigate, it is important to have documentation that demonstrates a failure to act reasonably.

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