Sunday, September 11, 2011

Ontario Employment Law: Reasonable Notice And The Duty to Mitigate

When an employee is wrongfully dismissed by his or her employer, this means that he or she is entitled to pay in lieu of reasonable notice at common law.

Where the contract is silent on the period of reasonable notice, reasonable notice is normally calculated in accordance with the guidelines set down by the Ontario Court of Justice in Bardal (see a previous post on point here).

That said, the law imposes an obligation on a wrongfully dismissed employee to mitigate his or her damages during the notice period which may result in a large reduction in the damages ultimately received by the employee.

In Bowes v. Goss Power Products Ltd., decided July 5, 2011, Whitaker J. is forced to grapple with the rather curious question of whether the fact that an employer and employee have agreed by contract to a period of reasonable notice that is more generous than that provided for at common law, should be taking as implying that the parties have agreed to oust the obligation on the part of the employee to mitigate his or her damages, entitling him or her essentially to a pre-determined lump sum payment that cannot be discounted.

Whitaker J.'s answer: A resounding "no:"
[28]           Turning back to the present case, there can be no doubt that the parties wished to provide for certainty on a variety of points addressed in the employment contract - including the length of the period of reasonable notice, the basis for calculating wages owing during the notice period (base salary), the scope of the release, the boundaries of the entire agreement and the manner in which amendments to the contract were to be manifest.
[29]           This desire for certainty does not mean however that the parties agreed to relieve Bowes of his obligation to mitigate.
[30]           To reiterate, the real substance of Graham and those cases which follow is the notion that the core question for the court to answer is - what did the parties intend?  Certainly the parties could if they had so wished, provide that Bowes owed no duty to mitigate his losses.  Where the law following Graham clearly indicates that mitigation will be assumed as a general principle of contract law, the parties must in their choice of language, indicate that the presumption is rebutted.
In the case, a 3-year employee managed to secure a new job within 12 days of his termination, at the same rate of pay as he had had at his previous employment: $140,000.00 per annum. This in effect, rendered his generous contractual entitlement to six (6) months pay in lieu of notice otiose for all intents and purposes. 

- Robert Tanha, Toronto

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