Canadian Employment Law Today

Emplo y ment Law Today Canad ad a ian www.employmentlawtoday.com How would you handle this case? Read the facts and see if the judge agrees YOU MAKE THE CALL 8 Published biweekly 22 times a year Subscription rate: $299 per year CUSTOMER SERVICE Tel: (416) 609-3800 (Toronto) (800) 387-5164 (outside Toronto) Fax: (416) 298-5082 (Toronto) (877) 750-9041 (outside Toronto) E-mail: Carswell.customerrelations @thomsonreuters.com Website: www.employmentlawtoday.com Thomson Reuters Canada Ltd. One Corporate Plaza 2075 Kennedy Road, Toronto, Ontario, Canada M1T 3V4 Director, Carswell Media: Karen Lorimer Publisher/Editor in Chief: Todd Humber Editor: Jeffrey R. Smith E-mail: Jeffrey.R.Smith@thomsonreuters.com ©2016 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. The publisher is not engaged in rendering legal, accounting or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The analysis contained herein represents the opinion of the authors and should in no way be construed as being either official or unofficial policy of any governmental body. We acknowledge the financial support of the Government of Canada, through the Publications Assistance Program (PAP), toward our mailing costs. GST #897176350 YOU MAKE THE CALL Was TBG liable for reasonable notice damages for wrongful dismissal? OR Was Howard entitled to compensation for the balance of the fi ve-year contract that was terminated early? IF YOU SAID Howard was entitled to be paid for the balance of the fi ve-year contract, you're right. e Ontario Court of Appeal found that the motion judge was correct in that "every employment contract includes an implied term that an employer must pro- vide reasonable notice to an employee prior to the termination of employment" if there was no agreement to the contrary. However, the appeal court found the motion judge erred in fi nding there was no agreement to the contrary. e appeal court found the removal of the ambiguous clause didn't change the fi xed- term nature of the contract, which by hav- ing an end date automatically terminated the employment relationship without any com- mon law notice obligation. e ambiguous clause only provided for early termination, so without it there was no allowance for ear- ly termination of the contract and no stated notice obligation. e fact the contract was a fi xed-term contract was suffi cient to dis- place the common law presumption of rea- sonable notice on termination, said the ap- peal court. e court also found TBG sought to use the fi xed-term contract to limit or elimi- nate its severance obligation. But to do this, it had to communicate clearly its intention so Howard could properly choose whether he wanted to enter the contract or not. TBG drafted an ambiguous early termination clause that was found to be unenforceable, so it couldn't complain when it was held to the remaining terms of the contract, said the court. e court also found there was no duty to mitigate on the part of Howard since it wouldn't be fair to permit an employer "to opt for certainty by specifying a fi xed amount of damages for termination, and then permit it to reduce that amount by compelling the employee to mitigate his or her damages when mitigation was not addressed in the employment agreement." e court allowed Howard's appeal and found Howard was entitled to compensation for the balance of the contract. "In the absence of an enforceable contrac- tual provision stipulating a fi xed term of no- tice, or any other provision to the contrary, a fi xed-term employment contract obligates an employer to pay an employee to the end of the term, and that obligation will not be subject to mitigation," said the appeal court. For more information see: • Howard v. Benson Group Inc., 2016 Car- swellOnt 5382 (Ont. C.A.). Once more into the breach — of a contract THIS INSTALMENT of You Make the Call features a dispute over an employee's entitlement when his fi xed-term contract was terminated. John Howard, 59, was hired by e Benson Group (TBG) in September 2012 to be a truck shop manager and sales development man- ager at an automotive service centre in Bow- manville, Ont. He signed a fi ve-year, fi xed- term contract prior to starting in the position. e employment contract contained an article providing for early termination. TBG had the right to early termination without cause through a clause that stated "employ- ment may be terminated at any time by the employer and any amounts paid to the em- ployee shall be in accordance with the Em- ployment Standards Act of Ontario." On July 28, 2014, TBG terminated How- ard's employment, just 23 months into the fi ve-year contract term. e company took the position that the termination clause en- titled Howard to two weeks' salary in lieu of notice — the minimum allowed by the act. Howard commenced an action for breach of contract, seeking payment for the balance of the contract's term — more than three years' salary. He was granted summary judg- ment for the action, but the motion judge de- termined his compensation should be com- mon law damages for wrongful dismissal instead of his salary for the remaining three years on the contract. e amount of these damages and any obligation by Howard to mitigate his damages was to be determined in a mini-trial. e motion judge found that the clause in the contract allowing for early termination by the employer was unenforceable due to ambiguity. Once that clause was eliminated, the motions judge found the other provi- sions didn't demonstrate an intention by Howard and TBG to displace the common law presumption of reasonable notice, leav- ing "an implied term under the common law requiring 'reasonable notice' for the termi- nation of the employment of (Howard)." Howard appealed the decision, arguing he should be entitled to compensation for the balance of the contract instead of common law damages for reasonable notice.

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