Court Orders Full Three-Year Salary After Termination Clause Gets Overridden

Why It Matters

The decision confirms that superseding commercial agreements can enforce full fixed‑term payouts, reshaping how employers structure termination clauses in asset‑sale hires, and underscores rigorous enforcement of non‑compete covenants despite mitigation arguments.

Key Takeaways

• Asset purchase agreement superseded employment termination clause.
• Ontario law mandates full salary for fixed‑term breach.
• No mitigation; employee's outside earnings ignored.
• Non‑compete upheld; employee owes $20,692 damages.
• Court ordered $5,000 installment plus 6.5% interest.

Pulse Analysis

Ontario courts have long treated fixed‑term employment contracts as binding promises, with *Howard v. Benson Group Inc.* establishing that damages equal the unpaid salary for the contract’s remainder and that employees are not required to mitigate. This principle was reaffirmed in the Bouchard case, where the appellate court applied the rule despite the employer’s attempt to offset damages with the employee’s subsequent earnings. The ruling sends a clear signal that, in Ontario, the contractual term trumps any expectation of mitigation, reinforcing predictability for both workers and employers.

The case also illustrates the legal potency of superseding clauses embedded in ancillary agreements. By inserting a provision in the Asset Purchase Agreement that expressly "supersedes" any conflicting employment terms, FCAPX inadvertently committed to a three‑year salary guarantee, overriding the employment contract’s termination notice provision. Companies engaging in asset purchases or similar transactions must therefore conduct meticulous contract audits to ensure that employment obligations are not unintentionally escalated, as the financial exposure can be substantial when a fixed‑term salary must be paid in full.

Finally, the court’s simultaneous enforcement of a non‑compete against Bouchard, while denying mitigation on his wrongful‑dismissal claim, highlights a tension that HR and legal teams must navigate. Non‑compete clauses remain enforceable in Ontario when reasonably scoped, and violations can result in significant damages, as seen with the $20,692 award. Employers should align their termination strategies with any restrictive covenants to avoid contradictory positions that could undermine litigation outcomes. Proper drafting, clear hierarchy of agreements, and consistent policy application are essential to mitigate risk in complex employment arrangements.