The Ontario Court of Appeal Confirms: Independent Contractors Have a Duty to Mitigate
In a brief new decision, Monterosso (cob Trust Leasing Canada) v Metro Freightliner Hamilton Inc, 2023 ONCA 413, the Ontario Court of Appeal has clarified the scope of the duty to mitigate for independent contractors.
Pursuant to a contract entered into in March of 2017, the appellants engaged the respondent as an independent contractor for a fixed 72-month term. In November of the same year, the appellants terminated the relationship without cause. The trial judge awarded the respondent $552,500 plus HST for the remainder of the 65 months, finding that the contract did not have a termination provision and clearly provided for a fixed 72-month term.
The appellants’ argument was two-fold:
- The trial judge failed to consider an internal email correspondence from just prior to the execution of the contract wherein the appellants made the decision to add a provision to the contract to ensure that the respondent would be paid up until the last day of active service. The addition of this provision, the appellants argued, demonstrated that the 72-month term was never guaranteed.
- The trial judge erred in holding that the respondent was not required to mitigate his damages.
The Court of Appeal rejected the appellants’ first argument, finding that the language in the contract was clear and unambiguous, as opposed to that of the email correspondence, which was ambiguous. The contract also contained an “entire agreement clause” designed to reject precisely the sort of argument raised by the appellants.
However, the Court of Appeal accepted the appellants’ second argument on mitigation, finding that the trial judge conflated independent contractors with employees in that context. Although the Court of Appeal previously held in Howard v Benson Group Inc, 2016 ONCA 256[1] that employees under fixed-term contracts are entitled to damages equaling the loss of income for the balance of the fixed term without a duty to mitigate, the court has never held that independent contractors do not have a duty to mitigate following the breach of a fixed-term contract. In fact, a subsequent case, Mohamed v Information Systems Architects Inc, 2018 ONCA 428, expressly left open the question of whether the principle from Benson applies to independent contractor fixed-term contracts. The Court of Appeal in Mohamed ultimately held that the finding in Benson was fact-specific.
Simply, the duty to mitigate is triggered when a contract is breached. This includes independent contractor contracts. While the terms of a contract may always provide otherwise, the contract in this case did not. The respondents had a duty to mitigate. Unfortunately for the appellants, they failed to meet their burden of establishing the respondent’s failure to mitigate. They led no evidence to establish there were jobs the respondent could have taken in response to the respondent’s extensive evidence detailing his unsuccessful job search efforts. Consequently, although the Court of Appeal found that the trial judge erred in failing to require mitigation, the result remained the same.
The appeal was dismissed with costs for the respondents.
[1] Leave to appeal refused, [2016] SCCA No 240.
