Employees who are wrongfully terminated have an obligation to take steps to try to limit their damages by seeking out replacement work and pay. This obligation is called the “duty to mitigate” and it arises from general principles of damages. If an employee fails to take reasonable steps to mitigate, or if the employee successfully earns income from new employment during the applicable notice period, this impacts the court’s assessment of the damages awarded to the employee in a wrongful dismissal action. Generally speaking, employees are not entitled to recover damages from their prior employer for losses they managed to avoid through new employment or for losses that could have been avoided through reasonable action on their part.
Although the application of mitigation principles to employment contracts is fairly well-established, until very recently, the case-law in British Columbia did not clearly resolve this question: whether the duty to mitigate applies to fixed-term employment contracts when an employee is terminated prior to the end of its stated term. In other words, is an employee still subject to the same obligation to take steps to mitigate their loss and damage if their employer terminates prior to the end of the fixed term?
On August 8, 2025, the BCCA delivered its judgment in Mac’s Convenience Stores Inc. v. Basyal, 2025 BCCA 284 (“Basyal”) confirming that employees terminated from fixed-term employment contracts are subject to a duty to mitigate, so long as the fixed-term contract does not contain express terms providing otherwise.
The Basyal decision involved a class action lawsuit by temporary foreign workers (“TFW(s)”) against Mac’s Convenience Store Inc. (the “Company”). TFWs were hired by the Company under fixed-term (24 month) contracts, but some TFWs after arriving in Canada learned that there was not sufficient work for them, and their contracts were terminated early in the fixed-term or before the term had even commenced. The contracts between the Company and the TFWs did not have express terms regarding mitigation. The BCCA held that the duty to mitigate applied to these employees whether they were within the term of the fixed-term contract or whether the term had not yet commenced.
The Basyal decision provides helpful clarity for British Columbia employers on this important issue: so long as a fixed-term employment contract does not contain terms that override an employee’s duty to mitigate, employees terminated before the conclusion of such fixed-term contract are subject to a duty to mitigate their damages. Both fixed and indefinite term employment contracts are treated similarly in that regard.
If you have any questions about this article, please contact your Harris lawyer.
