eCaseNote 2012 No. 06

The Duty to Mitigate: What All Employers and Employees Need to Know Part II

Bowes v Goss Power Products Ltd, 2012 ONCA 425

The duty to mitigate is an important legal issue that every employer and employee should be familiar with. Part I of this series explained the duty to mitigate and what that duty requires from an employee. It included a discussion of two cases, Silva v Leippi and Ghanny v 498326 Ontario Ltd, which have helped delineate the extent of the duty to mitigate. Part II tackles a different issue: whether an employee is always under a duty to mitigate in certain circumstances, and to identify and explain those situations in which the duty to mitigate does not exist. Does an employee always have a duty to mitigate?

According to a recent decision of the Ontario Court of Appeal, there may be certain situations when an employee does not have a duty to mitigate. In Bowes v Goss Power Products Ltd, Bowes was terminated without notice from his job with Goss Power. Bowes had an employment agreement that contained a fixed severance entitlement. In lieu of notice, the contract entitled Bowes to a salary continuance and car allowance for six months following termination. Not long after his dismissal, Bowes found alternate employment at the same salary he had been paid previously. Upon learning of Bowes’s employment, Goss Power submitted that Bowes was no longer entitled to the salary continuance and car allowance. Goss Power maintained that Bowes had a duty to mitigate, and that it was only obliged to pay Bowes the minimum entitlement required under the Ontario Employment Standards Act. Bowes claimed that he was entitled to the salary continuance as stated in his employment agreement, and was not subject to a duty to mitigate.

At trial, the Ontario Supreme Court held in favour of Goss Power. The judge determined that “the mere fact that the parties have agreed on the period of reasonable notice does not mean that the obligation to mitigate is ousted by the agreement.” As Bowes had secured alternate employment, it was not necessary for Goss Power to pay the salary continuance. The Court held that such a payout would amount to double-recovery for Bowes.

The Court of Appeal, however, disagreed with the trial judge’s assessment. They found that an implied term of reasonable notice had very different obligations from a contractuallyestablished notice period and stated, “When parties contract for a specified period of notice or pay in lieu they are choosing to opt out of the common law approach approach…In doing so, the parties should not be taken as simply attempting to replicate common law reasonable notice.”

Therefore, the Court of Appeal determined that an employee’s duty to mitigate will only be an issue where damages are at large. That is, an employee who enters into an employment agreement that specifies the liquidated damages or contractual sum to be paid in lieu of notice will not be subject to a duty to mitigate. The only way the duty to mitigate would exist in a fixedseverance employee agreement is if the duty is expressly written in the contract.

Conclusion

It is imperative that both employers and employees know whether or not they are under a duty to mitigate and what that duty entails. Although the cases discussed in both parts of this series are not from Newfoundland, it is reasonable to believe that the same principles would be accepted in this Province.

Employers and employees need to be aware whether an employment contract has an implied term of reasonable notice or a contractually-established notice period. If the latter is the case, there may be no duty on the employee to mitigate. However, if there is an implied term of reasonable notice, or a term that expressly requires the employee to mitigate, the terminated employee will be expected to use all reasonable effort to secure alternate employment. A failure to do so can significantly reduce, or even extinguish, a wrongfully dismissed employee’s claim for damages.



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