The recent decision of the Ontario Court of Appeal in Howard v. Benson Group
Inc. clarifies the current state of the law on
the duty to mitigate where a fixed term employment contract is
In this case, Mr. Howard was employed at the Defendant's
auto service center as a manager. He had a written employment
contract for a five-year term starting in September, 2012.
His employer terminated the contract after almost two years,
The contract included the following provision concerning the
employer's right to early termination without cause:
"Employment may be terminated at any time by the Employer
and any amounts paid to the Employee shall be in accordance with
the Employment Standards Act of Ontario."
The employer took this to mean that it had the right to
terminate the contract early at any time, at which point it would
be liable to the employee only for statutory benefits.
Mr. Howard's position was that he was owed the full amount
that would have been payable for the balance of the employment
contract, as a lump sum.
The matter went to trial. The trial judge concluded that the
early termination clause was so ambiguous as to be
unenforceable. He then concluded that the employee was
entitled to damages, but the damages were to be calculated on the
basis of reasonable notice at common law.
Furthermore, the judge determined that in accordance with usual
common law principles, the employee had a duty to mitigate those
The employee appealed to the Court of Appeal both on the
question of the applicability of common law reasonable notice in
these circumstances, and on the question of his having a duty to
The Court of Appeal allowed the appeal. It ruled that as the
relationship was governed by a fixed term contract, the common law
presumption of the employer having an implied obligation to provide
reasonable notice of termination was completely displaced.
The judge's characterization of the early termination clause in
the agreement as ambiguous was not challenged by either party but
the Court of Appeal considered that whatever it meant, it did not
alter the fact that this was a fixed term contract.
Accordingly, the employer was liable for the immediate payment of
everything that would have been paid to the employee over the
balance of the term of the contract had it not been terminated.
The Court of Appeal went on to determine that in such
circumstances, the employee was under no duty to mitigate. As a
fixed term employment contract requires the employer to pay the
employee to the end of the term, in effect this means that the
parties have contracted out of the common law approach to
reasonable notice subject to mitigation.
As a result, even if Mr. Howard had obtained another job the day
after his employer terminated the fixed term employment contract,
he would have been entitled to payment of the balance under the
This points up the very serious consequences of a fixed term
employment contract that does not have a clear and unambiguous
provision for early termination, specifying the rights and
obligations of the parties in that event. Clearly, a clause simply
saying that the employer may terminate early, without specifying
those consequences, cannot be relied upon by the employer to escape
the obligation to pay the balance due under the contract.
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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