Jun 29

Mitigation Duties for Fixed Term Independent Contractors

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In the recent decision of Monterosso v Metro Freightliner Hamilton Inc., 2023 ONCA 413, the Ontario Court of Appeal provided clarity regarding the mitigation obligations of fixed-term independent contractors. 

Background

The Plaintiff, Monterosso, was hired as an independent contractor by the Respondent, Metro Freightliner Hamilton, and signed a contract on March 7, 2017, for a 72-month term. However, on November 22, 2017, the Respondent terminated the Plaintiff’s services without cause. As a result, the Plaintiff filed a claim to seek payment for the remaining 65 months of the contract. The trial judge determined that the contract did not include a termination provision and that it clearly and unambiguously provided for a 72-month fixed term. Consequently, the trial judge found in favour of the Plaintiff and awarded him $552,500 plus HST, calculated based on the remaining monthly payments owed under the contract. 

Court of Appeal decision

At the Court of Appeal, the appellants argued that the trial judge erred in disregarding internal email correspondence that indicated the inclusion of a provision limiting payment to the last day of active service. However, the Court of Appeal rejected this argument, highlighting the presence of an “entire agreement clause” in the contract, which prevents reliance on discussions not explicitly stated in the contract.

The appellants also contended that the trial judge erred by determining that the Respondent was not obligated to mitigate damages. The Court of Appeal partially accepted this argument, noting that the trial judge had conflated the situations of independent contractors and employees under fixed-term contracts. While a prior case before the Court of Appeal, Howard v Benson Group Inc., 2016 ONCA 256, established that employees under fixed-term contracts are entitled to damages equivalent to the loss of pay for the remaining term without a duty to mitigate, it did not address whether independent contractors have a similar duty. Another case, Mohamed v Information Systems Architects Inc., 2018 ONCA 428, also left this question unresolved.

In this case, the Court of Appeal clarified the confusion and ruled that independent contractors under fixed-term contracts do have a duty to mitigate damages in the event of contract breaches, unless the terms of the contract state otherwise. 

Although the trial judge did not make specific findings on the mitigation issue, the Court of Appeal stated that the appellants failed to meet their burden of proving that the Respondent did not mitigate damages. The Respondent provided extensive evidence of unsuccessful job searches. Despite the trial judge’s error in failing to require mitigation, the result remains the same. Accordingly, the appeal was dismissed, and the Respondent was awarded costs in the amount of $17,500.

This case establishes the principle that independent contractors working under fixed-term contracts are still obliged to mitigate damages when facing contract breaches, unless their specific contract stipulates otherwise.

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