Fixed Severance Entitlements

November 19th, 2013 by

In this video, Justin Winch is speaking about fixed severance entitlements at the Devry Smith Frank LLP exclusive human resource seminar at the Toronto Don Valley Hotels and Suites this fall.

Justin Winch is an established employment lawyer at Devry Smith Frank LLP.

A recent case from the Ontario Court of Appeal known as the Bowes decision has really altered the landscape when it comes to the duty to mitigate under an employment contract damages and it can have a significant impact on employers who use employment contracts in determining how much they must pay terminated employees. Often times, there will be a fixed amount such as three months or six months, but this recent decision may cause you some headaches that you didn’t anticipate. It could be a learning issue that you did not know about.

Employees that are terminated without a just cause or without reasonable notice of their termination must be paid in lieu of. Before the recent decision, the employee had the duty to mitigate damages. The duty obligated employees to seek out and accept reasonable alternate employment and allow the employer to reduce its obligation. If a reasonable notification period was six months and after two months of searching, the employee found a new job, the employer could essentially claw back the payments that were owed to the employee.  The reason why this was done, is because severance is not a reward, it is simply a stepping stone or a bridge that gets you from one job to the next. It is essentially a safety net that the law says is important to make sure that people that follow out of the workforce are able to get back on their feet.

The duty to mitigate applied to both common law dismissal damages where the employment contract did not specify the amount as well as those fixed by employment contracts. The reason why employers would often specify the amount of damages within a contract was to avoid the uncertainty.

After the Bowes vs Goss Power Products decision, the Ontario Court of Appeal disagreed with the employer’s reasoning and in the process, significantly changed the obligation of the employee to mitigate his or her losses where termination entitlements are fixed by an employment contract.

Watch the video to learn more about fixed severance entitlements in Ontario.

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For further information or assistance in regards to fixed severance entitlements or other matters regarding employment law, please contact one of our Toronto employment lawyers or contact Justin Winch directly.

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