Fixed term employment contracts have become quite popular these days, given the fluidity inherent in the modern labour market.
These will often have “termination for just cause” provisions and or damage limitation clauses.
Often, however, the courts will find that the impugned worker conduct does not merit a just cause (“no money payable”) result and that there is thus a wrongful dismissal.
The court will then turn its attention to the damage limitation clause. If that is not appropriately drafted, then the employee is entitled to damages.
The question then is, how should those damages be calculated?
Traditionally, the law will look at the age of the employee and her length of service and the type of job and will then determine a “notice period” which means how many months of notice the employer should have given the employee. If one knows the yearly income, it is a simple matter to divide by 12 and get a monthly amount and that times the number of months specified by the court, equals the gross damage award. The court then deducts any mitigation income (income earned from a replacement job) earned by the employee during those same months, to get to a net award.
Now in fixed term contract cases, if the employer has let the employee go early in the contract, it may benefit the employee to not use the usual approach, but rather, seek the money that would have been payable to her over the balance of the fixed term.
The question then presents itself, should the court still deduct any mitigation income earned during that time period from that damage award?
A recent Ontario Court of Appeal case has indicated, that unless there is a clear clause in the contract benefiting the employer, the answer is no- i.e. the employee will get the entire balance of the fixed term contract as damages.
Employers, beware. Further, drafting lawyers beware, as I can see an employer making a negligence claim against its lawyer if the difference between the damages that would have been applicable if mitigation had been considered and the damages awarded, were significant.