legal words
any duty to mitigate. The employee was
terminated without cause and was provided
a termination letter that stated
he would be paid reasonable notice but
was required to seek alternative employment
during this period. The employee
was able to find comparable employment
within 12 days. As such, the employer
took the position that the employee had
properly mitigated their damages and
was only entitled to the minimum notice
under the Employment Standards Act.
The Court of Appeal held that by contracting
for a fixed notice period, the
parties had contracted out of the common
law “reasonable notice” approach.
In addition, the court held that where
an employment contract provided for a
fixed notice period upon termination,
and was silent about mitigation, the employee
would not be required to mitigate
their damages.
In 2016, the Court of Appeal in
Howard v. Benson Group (“Howard”) provided
clarification on the duty to mitigate
in respect to fixed term contracts. The
court found that there was no reason to
depart from the rule set out in Bowes –
that there is no duty to mitigate where
the contract specifies a penalty for early
termination, even in the case of fixed
term contracts. Parties who contract for
a fixed term without providing enforceable
means to end the contract early are
contracting out of the common law. As
such, absent any contractual provisions
which stipulate a fixed period of notice,
or any other provision to the contrary,
under a fixed term employment contract,
an employer is obligated to pay damages
to the end of term without mitigation.
TAKEAWAY FOR EMPLOYERS:
The key takeaway for employers is that
the duty to mitigate is not an implied
term of every employment contract.
There are certain situations where the
common law is ousted, such as an employment
contract with a fixed period of
notice or fixed term contracts. As such,
employers must use clear and specific
language in employment contracts if
they hope to reduce damages on termination
through an employee’s mitigation
earnings.
2. DEDUCTION OF DISABILITY
BENEFITS OVER THE PERIOD
OF REASONABLE NOTICE
WHAT THE LAW WAS:
The deduction of short-term disability
(STD) and long-term disability (LTD)
benefits from wrongful dismissal damages
has been another area of evolution in
employment law over the past 25 years.
In 1997, the Supreme Court of
Canada’s decision in Sylvester v. BC held
that disability benefits paid for by an employer
would be deducted from wrongful
dismissal damages. The court found that
a dismissed employee was not entitled to
a “double recovery” of wrongful dismissal
damages and disability damages.
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TERMINATION CLAUSES ARE STILL COMMONLY USED BY EMPLOYERS IN
EMPLOYMENT CONTRACTS. HOWEVER, AS THE CASE LAW INDICATES,
EMPLOYERS SHOULD ENSURE THAT EMPLOYMENT CONTRACTS AND
TERMINATION CLAUSES ARE DRAFTED WITH A CERTAIN LEVEL OF SPECIFICITY
TO ENSURE COMPLIANCE WITH MINIMUM STATUTORY REQUIREMENTS.
HRPROFESSIONALNOW.CA ❚ SPECIAL CONFERENCE EDITION 2017 ❚ 13