Termination Clauses And Mitigation

Author:Mr Earl Phillips
Profession:McCarthy Tétrault LLP
 
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A recent Ontario Court of Appeal decision sounds a warning to employers – if you want to have a set amount of notice or compensation for termination without cause, AND you want to require the former employee to mitigate, you need to say so explicitly in the contract.

Goss Power Products had a written contract with its employee Bowes that stipulated that he would get six months notice or salary in lieu of notice if he was terminated without cause.  On termination, Bowes was told he would get six months salary continuance if he looked for other employment.  He was terminated on April 13, 2011 and started in a new job 12 days later.  His former employer paid him for three weeks (to meet its Employment Standards obligation), but no more.  The court said he was entitled to the full six months.

There have been different approaches to this issue in the past.  In BC, it has generally been held that a duty to mitigate arises with any breach of an employment contract.  In employment cases, that means the terminated employee has an obligation to make reasonable efforts to find suitable alternative employment and any employment income received during the period of notice reduces the liability of the former employer.  However, there has been a distinction drawn where the contract stipulated the payment of a certain amount as the method of termination as...

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