Re-Employed After 2 Weeks, Employee Gets 6 Months: Mitigation did not Apply to Contractual Notice Clause

by Dentons
Contact

[author; Naomi Horrox]

The Ontario Court of Appeal has held that an employee who found a new job after two weeks was entitled to the full six months’ pay in lieu of notice under his written employment contract because the principle of “mitigation” had not been specified in his contractual termination clause.

Peter Bowes was hired by Goss Industries Inc. as Vice-President, Sales and Marketing in the fall of 2007. Bowes signed an employment agreement in September 2007 and began working for Goss in October 2007. The employment agreement provided:

“The Employee’s employment may be terminated in the following manner and in the following circumstances . . . (c) By the Employer at any time without cause by providing the Employee with the following period of notice, or pay in lieu thereof: . . . (iii) Six (6) months if the Employee’s employment is terminated prior to the completion of forty-eight (48) months of service . . .”

The employment agreement was silent with respect to whether, if the employee found a new job within that six months, his “mitigation” income would be deducted from the six months of pay in lieu of notice.

On April 13, 2011, Goss terminated Bowes’ employment without cause. Bowes started a new job on April 25, 2011 with another employer at the same salary that he had been paid by Goss. When Goss found out, it stopped paying Bowes and took the position that he was only entitled to receive the minimum entitlement under the Employment Standards Act, 2000 of three weeks’ pay in lieu of notice because he had fully mitigated his loss by finding a new job.

The Court of Appeal reasoned that because a contractual termination provision “caps” an employee’s termination entitlement, often at an amount less than the common law notice that the employee would have received without a written employment contract, Goss should not be permitted to take advantage of Bowes reemploying quickly to reduce its payment obligation. The court noted:

“It is noteworthy that in the sports, entertainment and senior management fields it is commonplace for such contractual provisions to not be subject to mitigation. Where the rich, famous, and powerful are involved, there is no suggestion that such payments are unfair to the other contracting party [the employer], even where there is, in effect, total mitigation of the loss. A contract is a contract, and it is expected that it will be honoured. Nothing short of this can be countenanced where the terminated employee is less privileged.” (para. 52)

In the Court of Appeal’s view, there is nothing unfair about requiring employers to be explicit – specifically stating in the employment contract that mitigation will apply – if they intend to require an employee to mitigate what would otherwise be fixed or liquidated damages. What is unfair, according to the Court, is for an employer to agree upon a fixed amount of damages with an employee and then at the point of dismissal inform the employee that future earnings will be deducted from the fixed amount.

On this basis, the Court of Appeal ordered Goss to pay Bowes the full six months of salary in lieu of notice, even though Bowes had been unemployed for only two weeks.

A number of earlier trial-level decisions had held that mitigation is automatically “read in” to contractual termination terms even if mitigation is not expressly stated. The Bowes case appears to overturn those previous decisions. The result in any future case will depend on the particular language of the employment contract at issue, but it appears that, at the very least, the principle of mitigation will not be automatically read in. As a result, Ontario employers should review their contractual termination provisions and consider whether they wish to specify that if the employee finds a new job during the contractual termination notice period, the “mitigation income” will be deducted from any contractual pay in lieu of notice in excess of Employment Standards Act entitlements. It is well-settled, though, that mitigation will not apply to pay in lieu of notice and severance pay under the Employment Standards Act.

Bowes v. Goss Power Products Ltd.: http://www.ontariocourts.ca/decisions/2012/2012ONCA0425.htm

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:

Dentons
Contact
more
less

Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.