The law across Canada is inconsistent. In British Columbia, an employee on a fixed term employment contract (i.e., a contract that ends after a set period) has a duty to mitigate their damages if the contract comes to a pre-mature end.[1] This means a dismissed employee has a duty to take reasonable, prompt steps to seek new, replacement employment to minimize their damages and prevent the employer from being held responsible for losses that could have been avoided.
Not so in Ontario,[2] where courts have increasingly held that if an employer terminates a fixed term employment contract before it runs its course, absent an enforceable early termination clause, the employee does not have a duty to mitigate, and the employer may be responsible for paying out the remainder of the fixed term – with no deduction for mitigation. That means, for example, an employee dismissed one month into a one-year fixed term contract could be entitled to eleven months of
pay as damages, even if the employee secures a replacement job shortly after being dismissed.[3]
The Ontario approach appears to stray from long-held principles of contract law, and courts in other provinces have generally not followed suit. For example, courts in New Brunswick,[4] Saskatchewan,[5] and Alberta[6] have not been explicit about whether there is a duty to mitigate. However, when presented with evidence of actual mitigation, courts in these jurisdictions have found mitigation earnings to be deductible.
One thing’s for sure – these various lines of analysis have created confusion, inconsistency, and risk for employers across Canada. As one New Brunswick judge noted “Whether there is a duty to mitigate fixed term contracts is a bit more muddled across the country.”[7]
A recent British Columbia decision
A group of migrant workers came to Canada under the Temporary Foreign Worker Program. Each worker signed a fixed term employment contract to work for Mac’s Convenience Stores Inc. (“Mac’s”) in Western Canada. However, when the workers arrived in Canada, their jobs either did not exist or were inconsistent with the terms of their contracts. The workers commenced a class action against both Mac’s and the immigration firm that had introduced the employees to Mac’s, seeking payout of their employment contracts.
A key, preliminary issue was whether a fixed term worker has a duty to mitigate their losses. The Supreme Court of British Columbia answered that question – yes – a worker on a fixed term contract has a duty to mitigate unless the contract provides otherwise:
…the weight of the British Columbia law is that if a fixed term contract does not provide for early termination through a liquidated damages clause or otherwise, then there is a duty to mitigate. However, a term addressing whether there is a duty to mitigate can be inferred or implied based on the circumstances including the regulatory and statutory context which the case was made.[8]
[emphasis added]
The next question was whether there was an express or implied term in the workers’ contracts that ousted the duty to mitigate. The court found the vulnerability of the workers created practical barriers to mitigation which amounted to an implied contractual term: “the context requires these contracts to be interpreted to oust the duty to mitigate.”[9] As such, the workers did not have a duty to mitigate.[10]
Mac’s appealed.
BC Court of Appeal decision
The British Columbia Court of Appeal agreed with the Supreme Court that, generally, a worker on a fixed term contract has a duty to mitigate. However, it disagreed that the contracts at issue contained an implied term ousting that duty. As such, it allowed Mac’s appeal.
According to the court, while there may have been practical barriers to mitigation, making it less likely the workers would find alternative employment, this practical reality did not amount to an implied contractual term ousting the duty to mitigate: “Terms cannot be implied into a contract merely because it seems fair or convenient. The terms must be necessary to give efficacy to the contract, or to avoid incoherence.”[11]
Lessons for employers
As rightly noted by the New Brunswick court, the law across Canada is muddled exposing employers to unpredictable financial risk.
Fortunately, we know courts in British Columbia, Alberta, Saskatchewan, and New Brunswick lean toward a duty to mitigate, whereas Ontario courts do not. Even more fortunately, there is a tool employers can use to mitigate this financial risk. In every employment contract – fixed or indefinite – it is critical to have a clear, enforceable, (early) termination provision.
A small investment into a well-drafted employment agreement, today, can help avoid a much larger payout, tomorrow.
For more information, or assistance, contact your Sherrard Kuzz LLP lawyer or, if you are not yet a client, at info@sherrardkuzz.com.
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[1] Mac’s Convenience Stores Inc. v. Basyal, 2025 BCCA 284
[2] Howard v Benson Group Inc., 2016 ONCA 256 at para 44.
[3] For this reason, we encourage Ontario employers to exercise caution when using a fixed term employment contract.
[4] New Brunswick v Dornan, 2023 NBKB 225.
[5] Crook v Duxbury, 2020 SKCA 43.
[6] Rice v Shell Global Solutions Canada Inc, 2019 ABQB 977.
[7] Dornan, supra note 4 at para 67.
[8] 2024 BCSC 2007 at para 201.
[9] Ibid at para 211.
[10] Supra note 8 at para 213.
[11] Ibid at para 73.