Monterosso v. Metro Freightliner Hamilton Inc., 2023 ONCA 413

Independent Contractors and their Duty to Mitigate

By Emily Hives

In the recent decision of Monterosso v. Metro Freightliner Hamilton Inc., 2023 ONCA 413, the Ontario Court of Appeal clarified that fixed-term independent contractors have a duty to mitigate their damages following the breach of an independent contractor agreement, unless the agreement provides otherwise.

On March 7, 2017, the appellants, Metro Freightliner Hamilton Inc., Metro Truck Niagara Inc., and Metro Collision Services Inc., engaged the respondent, Monterosso, as an independent contractor for a 72-month term; however, the appellants terminated the respondent’s services without cause on November 22, 2017. Monterosso filed a claim for the payments due for the remaining 65 months of the contract. The trial judge found that the contract did not have a termination provision, and it clearly and unambiguously provided for a 72-month fixed term. As a result, the trial judge found in favour of Monterosso and awarded him $552,500 plus HST, representing the remaining amount due under the contract. 

The appellants first argued that the trial judge erred in failing to consider internal email correspondence which suggested that a provision was added to the contract to ensure the respondent would be paid until the last day of active service. The Court of Appeal rejected this argument, finding that the email correspondence was ambiguous, the contract was clear and unambiguous, and there was an “entire agreement clause” in the contract.

The appellants also submitted that the trial judge erred in holding that the respondent was not required to mitigate damages. The Court of Appeal agreed and held that the trial judge erred by conflating the situation of independent contractors with that of employees working under fixed-term contracts.

The Court of Appeal confirmed that fixed-term independent contractors have a duty to mitigate their damages in the event of a breach of the independent contractor agreement unless the agreement provides otherwise. The Court also noted some potential exceptions, such as where a contractor is in an exclusive, employee-like relationship with the other party, or is dependent on the other party, which did not apply to the facts of this case. There was no basis for the trial judge to conclude that the respondent was not required to mitigate.

Although the trial judge did not make any findings with respect to the respondent’s mitigation efforts, the Court of Appeal found that they could determine the issue. The respondent filed extensive evidence detailing his unsuccessful job search while the appellants led no evidence to establish that there were jobs the respondent could have taken. As a result, the appellants could not establish that the respondent failed in his duty to mitigate and the appeal was dismissed.

It is essential to have a lawyer review and provide advice with respect to obligations and entitlements under independent contractor agreements and employment contracts. Please contact Emily Hives or Justin Heimpel for assistance.