An employee, who is terminated without cause, is not required to mitigate when entitled to a fixed term of notice or pay in lieu

Bowes v. Goss Power Products Ltd., 2012 ONCA 425 holds an employee, who is terminated without cause, is not required to mitigate his or her loss when entitled to a fixed term of notice or pay in lieu, and the contract of employment is silent with respect to mitigation:

[34]       An employment
agreement that stipulates a fixed term of notice or payment in lieu should be treated as fixing liquidated damages or a contractual amount.  It follows that, in such cases, there is no obligation on the employee to mitigate his or her damages.

[35]       To reiterate, the premise of Graham, set out at para. 53, was as follows:  

[A contractually fixed term of notice] is nothing more than an agreement between the parties as to the length of the reasonable notice to terminate the contract. I see no reason why there should be any distinction drawn between contracts of employment where the notice period is not stipulated and those where it is with the result that there would be a duty to mitigate in the former but not in the latter. [Emphasis added.]

[36]       In my view, Nordheimer J. in Graham, and the application judge in this case, erred by treating a contractually fixed term of notice as effectively indistinguishable from common law reasonable notice.

[37]       When parties contract for a specified period of notice or pay in lieu they are choosing to opt out of the common law approach applied in Bardal.  In doing so, the parties should not be taken as simply attempting to replicate common law reasonable notice.  The Alberta Court of Appeal explained as follows in Brown v. Pronghorn Controls Ltd., 2011 ABCA 328, 515 A.R. 128, at para. 47:

If the contract entitles the employee to payment of money, howsoever calculated, on termination, that right to that money is contractual. As such, the parties were not bound to specify an entitlement that is equal or even analogous to the quantum of reasonable notice that the common law might require if the contract was silent.

Damages for contractually stipulated notice or pay in lieu should not be analogized directly to damages for common law reasonable notice.  The parties have specifically contracted for something different; it is an error to simply equate the two.