Employers who fail to incorporate a binding termination clause into their written employment agreements may face significant, and unexpected, liability for severance. This lesson was learned the hard way by Qualified Metal Fabricators (“QML”) in a recent case out of Toronto.
On June 21, the Ontario Court of Appeal reversed the trial decision in Bowes v. Goss. It held that the duty to mitigate does not apply where an employment contract contains a clause setting out an employee's severance entitlement arising from a termination without cause. However, the decision maintains the duty to mitigate where it is expressly incorporated in the employment contract.
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