Mitigation: Independant Contractors vs Fixed Term Contracts

By Matt Lalande in Employment Law, Wrongful Dismissal on June 16, 2023

Our Hamilton Employment Lawyers were recently asked whether independent contractors have to mitigate their damages in the context of a wrongful dismissal case. The answer is yes, or better yet, probably.

What is mitigation in the context of employment law?

In the context of employment law in Canada, “mitigation” refers to the duty of a dismissed employee to make reasonable efforts to find comparable employment after being terminated. The goal of mitigation is to minimize any potential loss or damage the employee might suffer due to the termination. This could involve applying for jobs, attending interviews, and accepting reasonable offers of employment.

The principle of mitigation comes into play when determining the amount of damages an employee can claim for wrongful dismissal. The courts take into consideration whether the employee has made a reasonable effort to find alternative work and reduce the impact of their loss.

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If an employee fails to mitigate their damages, i.e., if they fail to make a reasonable effort to find similar employment, the court may reduce their wrongful dismissal damages. This is because the law assumes that the employee should not sit idly by and allow their losses to accumulate without making a sincere attempt to find a new job.

It’s also important to note that the burden of proof is generally on the employer to demonstrate that the employee failed to mitigate their damages. They need to show evidence that the employee did not take reasonable steps to find alternate employment or that they unreasonably refused a suitable job offer.

The exact definitions and applications of mitigation can vary depending on the specific circumstances and case law, so individuals with specific questions or concerns are always encouraged to seek legal advice. This is especially important because employment law can be complex and can differ significantly between jurisdictions.

Are you a fixed term employee?

A fixed-term employee in the context of Canadian employment law refers to an employee who is hired for a specific period of time or for a specific project or task. The length of the term could be defined by a period (like six months or one year), or by the completion of a specific project or task.

Fixed-term contracts differ from permanent or indefinite term employment contracts, where the employment continues until either the employer or the employee terminates the relationship. Fixed-term contracts, on the other hand, automatically end at the conclusion of the agreed-upon term or the completion of the task.

Fixed-term contracts can be beneficial for both employers and employees in certain situations. For example, they can provide employees with job opportunities and experience, while giving employers flexibility to meet specific short-term staffing needs.

However, there are also potential drawbacks and legal considerations with these types of contracts. Employers must be careful when drafting fixed-term contracts to avoid inadvertently creating an indefinite term contract or becoming liable for termination pay at the end of the contract. For employees, it’s important to understand the terms of the agreement and the implications of a fixed-term contract, including what happens at the end of the term.

The interpretation and enforcement of fixed-term contracts can vary between provinces and territories, as employment law in Canada is largely a provincial/territorial jurisdiction (except for federally regulated industries). Therefore, it is always wise to seek local legal counsel when dealing with these matters.

Do Fixed-term Employees have a duty to Mitigate?

Curre ntly, the answer is no. The Court of Appeal help in Howard v. Benson Group Inc., 2016 ONCA 256, 129 O.R. (3d) 677, leave to appeal refused, [2016] S.C.C.A. No. 240, 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. As of 2023, the Ontario Court of Appeal has never held that independent contractors do not have a duty to mitigate following breach of a fixed-term contract. 

What is an Independent Contractor?

An independent contractor in the context of Canadian employment law refers to an individual who provides services under a contract, but is not considered an employee of the company they’re working for. They operate their own independent business, and their relationship with the company is typically defined by a contract that outlines the nature of the services to be provided, the compensation, and other terms and conditions.

Independent contractors differ from employees in several key ways:

Control: Independent contractors generally have more control over their work, including how and when it’s completed. They may have multiple clients and typically have the freedom to choose which projects they take on.

Risk and reward: Independent contractors take on more risk, as their income depends on their ability to secure contracts and successfully complete their work. However, they also have the potential to earn more than employees, particularly if they have specialized skills in high demand.

Equipment and expenses: Independent contractors often supply their own equipment, materials, and other resources necessary for their work. They’re also responsible for their own business expenses.

Taxes and benefits: Independent contractors are responsible for handling and paying their own taxes. They’re not entitled to employee benefits such as paid time off, health insurance, or employment insurance benefits (unless they opt to pay into these programs).

Liability: Independent contractors can be held personally liable for any mistakes or negligence in their work.

However, the line between an independent contractor and an employee can sometimes be blurred, and misclassification can lead to legal issues. The specific tests used to determine the status of a worker can vary between provinces and territories, and in certain situations, a worker might be considered an employee for some purposes (like tax) and an independent contractor for others (like employment standards).

The Canadian courts look at a number of factors to determine whether a worker is an employee or an independent contractor, including the level of control the worker has over their work, whether the worker provides their own equipment, whether the worker has a chance of profit and risk of loss, and whether the work is integral to the business.

If you have specific questions or concerns about whether or not you are an independent contractor contact our Hamilton Employment Lawyers today.

Do Independent Contractors have a Duty to Mitigate?

Yes. A duty to mitigate arises when a contract is breached, including contracts with independent contractors. Of course, the terms of an employment contract may provide otherwise.

The case of Mohamed v. Information Systems Architects Inc., 2018 ONCA 428 is an important case in Canadian employment law as it related to independent contractors and the duty to mitigate.

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In this case, Mr. Mohamed was an independent contractor who signed a fixed-term contract with Information Systems Architects Inc. (ISA). The contract stipulated that either party could terminate the contract early, but if ISA were to do so, it would be obligated to pay Mr. Mohamed the remainder of the fixed-term contract, unless the termination was due to Mr. Mohamed’s criminal behavior.

Subsequent to the signing of the contract, ISA placed Mr. Mohamed on an assignment with Canadian Tire, which required a criminal background check. Mr. Mohamed disclosed a prior criminal record to both ISA and Canadian Tire. Despite the disclosure, ISA terminated Mr. Mohamed’s contract due to the criminal record.

Mr. Mohamed sued ISA for breach of contract and won at trial. ISA appealed, and one of their arguments was that Mr. Mohamed had not adequately mitigated his damages.

The Ontario Court of Appeal upheld the trial court’s decision, stating that ISA breached the contract. Regarding mitigation, the court stated that an independent contractor, like Mr. Mohamed, had a duty to mitigate their damages (i.e., to make reasonable efforts to find comparable work), but that duty did not extend to entering into another fixed-term contract. The reason being that entering into a fixed-term contract could potentially put the contractor in a position of breaching one of their contracts, thus it cannot be considered a “reasonable” effort to mitigate.

Therefore, in this particular case, the court found that Mr. Mohamed had adequately met his duty to mitigate despite not entering into another fixed-term contract after the termination.

This case further clarifies the legal nuances of independent contractor relationships and the concept of mitigation in the context of Canadian employment law. For further clarification, contact Hamilton Employment Lawyer matt

If you are a Fixed Term Employee who’s been Fired – We Can Help.

Matt Lalande is a Hamilton Employment Lawyer who’s been representing employees for over 20 years. If you are a fixed contract employee who’s been terminated, call us today, no matter where you are in Ontario at 1-844-LALANDE or local throughout Southern Ontario at 905-333-8888. Alternatively, you send us a confidential email through or website an our intake specialist would be more than happy to set up your free consultation.

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