Early Days

Modern case law, generally, has determined that there is no mitigation offset from a fixed term contract or where the contract defines a fixed severance payment. There are certain exceptions to this proposition to be reviewed momentarily.

The following hallmark decisions may be staledated, but nonetheless they will provide the correct starting point. The modern law follows.

Supreme Court of Canada - Sinclair

The Supreme Court decision of 1955 in Sinclair v Canadian Ice Machine involved a fixed term contract for a 7 year period ending December 10, 1953. Sinclair was terminated effective April 30, 1951. All members of the court saw a duty to mitigate.

This was followed in Prozak v Bell Telephone, a 1984 decision of the Ontario Court of Appeal. The plaintiff-respondent in this instance had argued that the employment and commission agreement in place was a fixed term agreement in which mitigation was not required. This argument failed as the Court of Appeal saw the relationship as one subject to reasonable notice.

The plaintiff had asserted that he could ignore the repudiation, declare he is ready and willing to honour the agreement and sue for the sum which would be due under the terms of the alleged agreement, in which case, there would be no need to mitigate. This submission was rejected by the Court of Appeal.

Neilson - Trial- No Mitigation Obligation

Neilson v Vancouver Hockey Club also involved a mitigation issue under a fixed term contract. At trial it was held that there was no mitigation obligation under a fixed term contract, where the terminated employee remains available to perform his obligation under the terms of the contract:

The defendants say as part of the argument that they are entitled to have the principles of mitigation apply to reduce the plaintiff’s damages. I agree in cases of indefinite term of employment damages for lack of reasonable notice must be offset by proper attempts to mitigate. However, in the case of contracts of employment for a fixed period mitigation is not a factor unless the party terminated accepts the unlawful termination and does not make himself available to perform and obtains new employment, thus breaching the agreement himself. In the case at bar, should I have held that the plaintiff was in breach of the contract when he took employment in Los Angeles and Chicago notwithstanding the clear decision on the part of the defendant to be done with him, I would be obliged at law to consider whether the plaintiff properly mitigated his damages.

Neilson - BCCA - mitigated income reduces claim

The BC Court of Appeal reversed, holding that mitigation income offsets the claim, unless the contract states to the contrary. To be precise, the ratio of the majority was not that there was a duty to mitigate, but where there was mitigated income, this should reduce the claim. The Court ducked affirmatively deciding the issue as to whether there was a duty to mitigate. It does refer to several decisions coming to this conclusion, but this is not the reasoning used to decide the case:

[41] On this question I conclude that whether or not the plaintiff was bound to mitigate is irrelevant. He cannot recover for avoided loss in any case.