Western Courts Clarify Effect Of Mitigation In Fixed-Term Contracts

• Published date: 29 July 2020
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal
• Law Firm: MLT Aikins LLP
• Author: Calen Nixon, Allison Graham and Evan Morrow

When an employee is dismissed from a fixed-term contract and obtains alternate employment, how does this affect potential monies owing from the former employer?

Employers should beware that where improperly drafted or misunderstood, fixed-term contracts may expose employers to unanticipated liabilities.

Recent authorities from Ontario have held that a dismissed employee employed pursuant to a fixed-term contract does not have a duty to mitigate, such as to find alternative employment, during the unexpired term of the contract. However, these authorities are unclear as to whether or not actual mitigation, such as pay earned from the alternative employment, is deductible from damages in claims of wrongful dismissal. This has led to some confusion about the correct approach for assessing mitigation in respect of fixed-term contracts.

Saskatchewan, Alberta and British Columbia courts have more recently provided guidance about the appropriateness of deducting earnings in cases where a dismissed employee to a fixed-term contract obtains other employment during the remaining term of the fixed-term contract. All three of these courts have been faced with employees dismissed under such contracts, and all three...