A Contract Is A Contract Is A Contract: Regardless Of Mitigation, Terminated Employee Entitled To Full Damages

Author:Mr Jeff Mitchell and Meagan Jemmett
Profession:Borden Ladner Gervais LLP
 
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If an employee is terminated without cause, but finds another job shortly thereafter, is the employer still liable for damages to the former employee? In Bowes v Goss Power Products,1 the Ontario Court of Appeal has held that, in some circumstances, the employee may be entitled to full recovery, regardless of the re-employment.

In 2007, Goss Power Products hired Peter Bowes. The employment agreement stated that Goss was entitled to terminate Bowes' employment without cause by paying him six months' salary. The contract also stated that Bowes released Goss from "any and all claims whatsoever which the employee may have arising out of the termination" except for those under the employment contract.

In 2011, Goss terminated Bowes' employment without cause and without notice. The letter of termination stated that Goss would continue to pay Bowes his regular salary for six months. The letter also stated that Bowes had an obligation to seek new employment and to advise Goss immediately if he found another job.

Less than two weeks after he was terminated, Bowes began a new job at the same salary he had earned at Goss. Goss informed him that because he had mitigated his damages, it would pay only the statutory minimum of three weeks' salary in lieu of notice. However, Bowes claimed that his employment contract with Goss entitled him to six months' salary, regardless of mitigation.

Bowes applied to the Ontario Superior Court to resolve the dispute. Justice Whitaker of the Superior Court held that the employment contract did not release Bowes from his duty to mitigate his damages upon termination. Justice Whitaker, applying recent case law in Ontario, concluded that since the contract was silent as to mitigation, mitigation was to be implied into the contract in the same manner as if the common law applied. In other words, there was no difference, in Justice Whitaker's view, between a contractual and a common law notice period: mitigation applied equally to both. As Bowes had successfully mitigated his damages, he was entitled only to the statutory minimum of three weeks' pay in lieu of notice.

The Ontario Court of Appeal disagreed. The five-justice panel held unanimously that since the parties had agreed to a fixed notice period but made no specific reference to mitigation, Bowes was entitled to the full six months' pay. The Court held that by agreeing to a fixed term of notice, the parties had opted out of the common-law approach, which would have...

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