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 were faced with employees who in fact mitigated.

Saskatchewan

In Crook v Duxbury, 2020 SKCA 43 [Crook], Ms. Duxbury was employed under what the parties agreed was a fixed-term employment contract which did not contain any provision regarding early termination. A few months into the employment, Ms. Duxbury was dismissed and as a result, sought out and obtained alternate employment. She sued her employer for wrongful dismissal. In summary judgement proceedings before the Court of Queen's Bench (2018 SKQB 353), Ms. Duxbury successfully argued that her earnings from her alternate employment should not be subtracted from damages owed to her by her employer, and her former employer appealed.

The Court of Appeal disagreed and subtracted Ms. Duxbury's earnings from her awarded damages, in accordance with "the usual principle of the law of damages, i.e., recovery is limited to the actual loss" (para 46). In so doing, the Court of Appeal addressed the decisions from Ontario submitted in support of Ms Duxbury's position and came to a different conclusion than the Chambers judge about the mitigation principles they address. The Court reasoned that when a breached fixed-term contract is silent on early termination and the dismissed employee in fact obtains alternate...