The Ontario Court of Appeal recently held that the duty to mitigate following
dismissal does not apply when a dismissed employee's contract
contains an express notice of termination provision and is silent
with respect to mitigation.
Facts and Judicial History
Peter Bowes (Bowes) began his employment with Goss Industries
Inc. (Goss) in October 2007 as a Vice-President of Sales and
Marketing. As part of his employment contract, Bowes was
entitled to six (6) months' notice of termination (or pay in
lieu thereof) if he was terminated without cause before completing
four (4) years' service with Goss. Bowes was terminated
without cause by Goss in April 2011. Thus, Bowes was entitled
to six (6) months' salary continuation pursuant to his
However, a dispute arose when Bowes secured new employment only
two (2) weeks later at the same salary level. Upon becoming aware
that Bowes was working again, Goss took the position that Bowes was
only entitled to termination pay under the Employment Standards
Act, 2000(ESA) as he had successfully mitigated his loss at
common law. This common law duty holds that a former employee
must make reasonable efforts to mitigate the damages payable by
their former employer by seeking alternative sources of
After not receiving further payments, Bowes brought a court
application to determine his rights under his employment
agreement. The application judge held that Bowes had a duty
to mitigate since his agreement did not directly or impliedly
relieve him of this obligation. Consequently, the judge held
that Bowes was not entitled to further continuance payments (beyond
termination pay under the ESA).
The Court of Appeal
The Court of Appeal overturned the application judge's
decision and held that when parties contract for a specified period
of notice (or pay in lieuthereof) they are choosing to opt out of
the "common law reasonable notice approach" and the
employee is not required to mitigate. In particular, the
amount of notice specified becomes a contractual entitlement
similar to liquidated damages and is not subject to mitigation in
the absence of an express provision to that effect in the
The Court of Appeal further held that it would be unfair and
counter-intuitive to permit an employer to benefit from the
certainty of a fixed entitlement termination clause and also allow
it to later claim that termination payments should be reduced by
raising the issue of mitigation when it was not mentioned in the
The Court of Appeal also took note of a broad release in
Bowes' employment agreement in favour of Goss. This
release stated that Bowes would forego any and all claims against
Goss related to his termination (with the exception of claims to
enforce the termination clause). The Court of Appeal stated
that such a broad release demonstrates an intention to avoid the
courts and confirms a desire for finality. In turn, this
bolstered a finding that the parties intended that mitigation would
not apply unless the agreement expressly stated otherwise.
As it is common for employment agreements to contain fixed
entitlement termination clauses, this decision is noteworthy for
employers across Canada, and particularly in Ontario. An
employer considering hiring an individual under a contract with a
fixed notice period in excess of statutory minimums must insert a
clear requirement that the individual is subject to mitigation if
it is intended that mitigation apply. Otherwise, such
employer will find themselves in the same situation that Goss
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