The Ontario Court of Appeal has now ruled on the damages an
employer owes to an employee upon early termination by the employer
of a fixed term contract where the contract does not contain an
early termination clause --- the employee is entitled to all wages
and benefits to the end of the term of the contract.
Fixed term employment contracts are often entered into for the
purpose of obtaining certainty and permitting the employment
contract to automatically come to an end at the expiration of the
contract term without the employer owing anything further to the
In 2015 the Superior Court held in Howard v. Benson Group
Inc.1 that because an early termination provision
in a fixed term contract was voided2, the employee was
entitled to common law reasonable notice with a duty to mitigate
and not entitled to wages and benefits to the end of
the contract. However, recently the Ontario Court of
Appeal3 overturned that decision finding that the fixed
term contract without an early termination provision still provides
the employee with the right to claim all wages and benefits owing
to the end of the 5-year contract when the employer chose to
terminate the contract early. As well, the employer had no duty to
General Rules Concerning Termination of Employment
for indefinite term
Fixed Term Contract
Employer's obligation at end of
The common law presumption applies that every employment
contract includes an implied term that the employer must provide
reasonable notice on termination.4
Contract ends automatically with no obligation on employer to
provide notice or payment in lieu of notice.5
Early Termination Clause in Contract(and employer terminates employment without
If the contract clearly specifies that the employee is to
receive some other period of notice or pay in lieu thereof, then
unless the clause is voidable for some reason, the employer is
obligated to provide the employee the notice as set out in the
If the contract fails to provide an early termination clause
with a pre-determined notice period, then the employee is entitled
to receive all wages and benefits to the end of the term of the
fixed term contract.7
Is there a duty to mitigate a pre-determined notice
period set out in the employment contract?
Employee only has a duty to mitigate if there is a clause in the
employment agreement (indefinite contract or fixed contract) that
specifically states that the employer has a duty to
Points to Ponder
When preparing employment contracts parties should consider
whether or not to include an early termination provision that
limits the amount owed to the employee should the employer wish to
terminate the contract. Should the employer wish to create an
obligation that any such amount is subject to mitigation, then the
requirement must be specifically specified.
Employers should review their employment contract templates from
time to time as employment law is constantly changing. The last few
years have rendered many termination clauses ambiguous and voidable
by the court. We at D&L would be happy to review your existing
employment contracts or assist you in creating a contract which is
binding under current law.
1 2015 ONSC 2638 (CanLII).
2 Clause 8.1 was voided by the court as the clause referred
to the employee being entitled to "amounts paid to the
Employee shall be in accordance with the Employment Standards Act
of Ontario [sic]" which does not refer to entitlement to
benefits under the said Act.
4 Ibid at para 20 relying upon Bowes v. Goss
Power Products Ltd., 2012 ONCA 425 (CanLII) at para
5 Ibid at para 21.
6 Ibid at para 20 relying upon Machtinger v.
HOJ Industries Ltd., 1992 CanLII 102 (SCC),  1 S.C.R.
986, at 998; Ceccol v. Ontario Gymnastic Federation
(2001), 2001 CanLII 8589 (ON CA), 55 O.R. (3d) 614 (C.A.), at
7 Ibid at para 22 relying upon Lovely v.
Prestige Travel Ltd., 2013, ABQB 467 (CanLII), at para 136;
Bowes, at para 26; Canadian Ice Machine Co. v. Sinclair,
1955 CanLII 44 (SCC),  S.C.R. 777, at 786.
8 Ibid at para 44; note that an employee has no
duty to mitigate any amount received in accordance with the
Employment Standards Act, 2000.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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