The recent Court of Appeal case of Monterosso v Metro Freightliner Hamilton Inc., 2023 ONCA 413, provides some clarity to businesses on whether independent contractors have an obligation to mitigate their damages. In this case, Metro Freightliner Hamilton Inc. (“Metro Freightliner”), hired Mr. Monterosso as an independent contractor for a 72-month fixed term contract. On November 22, 2017, Metro Freightliner terminated Mr. Monterosso’s services without cause while Mr. Monterosso still had 65 months left on his fixed-term contract.
The trial judge found that the contract did not have a termination provision and that it clearly and unambiguously provided for a 72-month fixed term contract.
Metro Freightliner challenged the trial judge's decision, asserting that the judge committed several errors throughout the decision. Among Metro Freightliner’s arguments was the assertion that the trial judge made a mistake in determining that Mr. Monterosso was not required to mitigate his damages.
The Court of Appeal found that the trial judge erred by drawing a parallel between the circumstances of independent contractors and those of employees operating under fixed-term contracts. The Ontario Court of Appeal considered the case of Howard v Benson Group Inc., 2016 ONCA 256, which found that employees under fixed-term contracts are entitled to damages equal to the loss of remuneration for the balance of the fixed term without a duty to mitigate. However, the Court of Appeal asserted that the Court of Appeal never held that independent contractors do not have a duty to mitigate following a breach of a fixed-term contract. The case of Mohamed v. Information Systems Architects Inc., 2018 ONCA 428, specifically left the question open as to whether Howard v Benson Group Inc. applied to fixed-term contracts of independent contractors.
In Mohamed v. Information Systems Architects Inc., the court held that in the specific case before it there was no duty to mitigate, as the parties intended the compensation for the fixed term contract to be a consequence of failing to terminate the contract in good faith. The Court of Appeal held that a duty to mitigate arises when a contract is breached, including contracts with independent contractors, unless the contract explicitly states otherwise.
As such, this case provides clarity to business owners that independent contractors who are providing services under fixed-term contracts will have a duty to mitigate their losses if the business decides to terminate the contract early.
About the author
Jessica Byles-Nolet is a lawyer at Sicotte Guilbault LLP, working in the Dispute Resolution and Litigation Group. She is passionate about litigation and eager to solve problems.