On April 8, 2016, the Ontario Court of Appeal affirmed that an employee whose
employment is subject to a fixed term, is upon early termination of his
employment, entitled to payment of an amount equal to his salary and benefits for
the unexpired term of the contract, with no duty to mitigate.
In the case of Howard v. Benson Group Inc. 2016 ONCA 256
the Ontario Court of Appeal overturned the summary judgment decision of Justice
Donald MacKenzie of the Superior Court of Justice. Benson had employed
Howard pursuant to the terms of a written employment agreement. The
agreement provided for a fixed five year term but also provided that Benson
could terminate Howard’s employment at any time “in accordance with the terms
and conditions of this agreement”. Specifically, a paragraph of the
agreement provided that upon termination, Howard would only be entitled to receive amounts in
accordance with the Employment Standards Act of Ontario.
Accordingly, when Benson terminated Howard’s employment
almost two years into the contract, it argued that its liability was limited to
two weeks salary in lieu of notice. The motion judge found that the
clause was unenforceable due to ambiguity and awarded Benson common law damages
for wrongful dismissal, subject to a duty to mitigate.
The Ontario Court of Appeal (Justices Cronk, Pepall and
Miller) disagreed with the motion judge. Justice Miller wrote the
decision of the court. Justice Miller held that the applicable standard
of review in this case was one of correctness. In other words, where the
motion judge’s decision contained an "extricable question of law" it was reviewable
on the correctness standard.
Justice Miller held that where an employment agreement
states unambiguously that the employment is for a fixed term it will oust the
implied term of an agreement that reasonable notice must be given for
termination without cause. If the parties to such a fixed term contract
do not specify a pre-determined notice period, the employee is entitled, on early
termination, to the wages he would have received to the end of the term.
Justice Miller cited an Ontario Court of Appeal case called Bowes v. Goss
Power Products Ltd. 2012 ONCA 425 for such authority.
Because the impugned clause was void for uncertainty,
Howard’s employment agreement unambiguously remained a fixed term
contract.
With respect to Howard’s duty to mitigate his damages,
Justice Miller found that the leading case from the Ontario Court of Appeal was
Bowes. Bowes held that a contractually fixed term of notice is
distinguishable from common law reasonable notice. Where the agreement
stipulates a fixed term of notice or payment in lieu, it should be treated as
fixing liquidated damages or a contractual amount. In such cases, there
was no obligation on the employee to mitigate his damages. Thus, the duty
to mitigate does not apply to liquidated damages or contractual amounts.
The Court of Appeal allowed the appeal and remitted the
matter to the motion judge for determination of the quantum of damages to which
Howard was entitled.
Regards,
Blair
