The Ontario Court of Appeal recently considered the common law
principles of reasonable notice and the duty to mitigate in the
context of fixed-term employment contracts in Howard v Benson Group Inc.
Howard, the plaintiff, was employed at an automotive service centre
pursuant to a five-year fixed term contract. He was terminated
without cause around two years into his contract. Howard brought an
action for wrongful dismissal and breach of contract, seeking
damages equal to the salary he would have received for the
remainder of the fixed term of his contract. On a motion for
summary judgment, the judge concluded that Howard was entitled only
to common law "reasonable notice", rather than the higher
damages he sought. Moreover, the judge concluded that Howard had a
duty to mitigate his damages by making reasonable efforts to find
Howard appealed to the Ontario Court of Appeal. Finding that the
motions judge had erred, the Court ruled that Howard was indeed
entitled to contractual damages for the unexpired portion of his
fixed-term contract. It reasoned that where no early termination
clause is specified in the contract, the parties have bargained for
a specific termination date, thus negating the rationale underlying
the common law duty to provide reasonable notice. More
significantly, the Court applied the same reasoning to find that
the common law duty to mitigate does not apply in the case of
fixed-term contracts that do not contain a mitigation clause.
The Court of Appeal's ruling goes beyond reinforcing the
importance of including carefully drafted termination provisions in
employment contracts. It also clearly establishes how important it
is to include early termination and mitigation clauses in
fixed-term employment contracts.
The Employer has filed leave to appeal to the Supreme Court.
Written with the assistance of Melanie Simon, articling
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