FAQ's Cases - Stewart McKelvey

Page: 11[28] The appellant submits that a contractually established notice period isdistinct from that which arises at common law. Specifically, he argues that whenan employment agreement specifies a period of notice the parties are merelyinserting a term akin to a pre-estimate of damages that would flow from nonperformanceof the agreement. General principles of contract law permit this aslong as the condition is not so oppressive as to constitute a penalty, and is2012 ONCA 425 (CanLII)reasonable in the circumstances: see H.F. Clarke Ltd. v. Thermidaire Corp. Ltd.,[1976] 1 S.C.R. 319, at pp. 330-31. Courts enforce such provisions outside ofthe employment setting, and, significantly, such damage provisions have beenheld not to be subject to a duty to mitigate: see J.G. Collins Insurance AgenciesLtd. v. Elsley Estate, [1978] 2 S.C.R. 916, at pp. 937-38. The appellant arguesthat the same approach ought to be taken in the employment context where acontract specifies the amount of damages payable upon termination.[29] The respondent argues that the idea of liquidated damages is not appositeto the field of employment law. In the respondent’s words, the “underlyingprinciples of damages for wrongful dismissal are inconsistent with the concept ofliquidated damages.” Thus, mitigation applies in the employment context unlessthe parties stipulate to the contrary in the agreement, either expressly or byimplication. The respondent cites as authority the Graham decision relied uponby the application judge.