A “Bad Bargain” Strictly Enforced: Court Holds Employer to 12 Months' Severance Despite Re-Employment
By Megan Lorenz and Shannon Whyley, K.C.
The below information is provided for information purposes only and does not constitute legal advice.
A clearly worded termination clause can be a double-edged sword. A recent decision of the Court of King's Bench for Saskatchewan confirms that where an employment contract promises a fixed amount on termination, that amount can be owed as a contractual debt, payable in full even if the employee promptly finds new and better-paying work. An employer who drafts a severance promise without addressing mitigation may be required to honour it regardless of what the employee earns elsewhere.
On May 1, 2026, the Court released its decision in Khan v Students' Union of the University of Regina Inc.¹ Justice Morris granted summary judgment to a dismissed employee, Haris Khan, and held that the Students' Union of the University of Regina Inc. (“URSU”) owed him 12 months' pay, being $77,380, less two weeks already paid following a wage assessment, together with $10,000 in moral damages and pre-judgment interest. URSU had argued that it dismissed Mr. Khan for cause and, in the alternative, that his post-dismissal earnings should substantially reduce any award. Both arguments failed.
Background
Mr. Khan was employed as URSU's Director of Programs and Public Relations from March 2023 until his dismissal in February 2024, a period of less than one year. His employment was governed by a two-page letter. One clause, which the Court called the “Dismissal Provision”, stated: “Upon termination, you will receive 12 month's notice or severance.”²
URSU terminated Mr. Khan for cause, citing absences from the office on three days in February 2024 and characterizing his paid absence as “time theft”.³ Mr. Khan's evidence was that he had been working from home on those days, that he had told a vice-president he was unwell, and that he had emailed the acting general manager about working remotely during the university's reading week.⁴ An employment standards officer initially found no cause and ordered two weeks of pay under The Saskatchewan Employment Act (the “Act”), which URSU paid without appealing.⁵ Mr. Khan then sued for wrongful dismissal and applied for summary judgment – a court process that allows for a swifter outcome without the necessity of the parties going through a full-blown trial.
Summary judgment and the failure of just cause
The Court rejected URSU's argument that credibility issues required a trial. The parties had filed extensive affidavits and conducted cross-examinations, and neither intended to call further witnesses, so the record permitted a fair and proportionate decision.⁶
On just cause, the onus of proof rested on URSU, and it was not met. The governing test is contextual and concerned with proportionality.⁷ URSU’s grounds for dismissal shifted over time, expanding from three days of absence in the termination letter to claims of ten consecutive days of absence and performance issues. The Court found the escalating allegations were unsupported, observed that the principal affidavit argued the case rather than stating facts, and noted that it came from a general manager who was hired after the dismissal and had been out of the country during the relevant week.⁸ Mr. Khan had never been disciplined, had received no warning that his conduct could lead to dismissal, and the evidence did not establish misconduct serious enough to justify termination without notice. An after-the-fact allegation that employer-paid professional development created a conflict of interest was also rejected.⁹
A contractual debt, not damages subject to mitigation
The central question on damages was how to read the Dismissal Provision. URSU argued that it set a 12-month notice period prior to dismissal or compensation based on a 12-month notice period subject to mitigation, so that Mr. Khan's quick and more lucrative re-employment earnings should be deducted. Mr. Khan argued that it fixed a severance amount payable without regard to mitigation.¹⁰ Following previous case law, the Court drew the key distinction: a contractual term requiring a fixed sum on termination creates a debt, while a term requiring notice gives rise to damages for wrongful dismissal that are subject to mitigation.¹¹ The Court concluded that URSU had promised either 12 months of notice or severance. Given that URSU did not provide notice, the Court was satisfied that severance applied. The Court read “severance” to mean pay in lieu of notice, and “12 months” to fix both the notice period and the size of the payout. Because the Dismissal Provision promised a set amount and said nothing about deducting other earnings, no mitigation applied. Any ambiguity was resolved against URSU under the doctrine of contra proferentem, as URSU had drafted the contract and held the bargaining power. As Justice Morris put it, URSU “may have made a bad bargain”, but it was “stuck with it”.¹² The Court fixed the proven remuneration at $77,380, being annual salary of $73,000 plus an annual RRSP contribution of $4,380, less the two weeks already paid; the value of health and dental benefits was excluded as unproven.¹³
Moral damages, but no punitive damages
The Court awarded $10,000 in moral damages.¹⁴ The award reflected bad faith in the manner of dismissal, including the failure to conduct a reasonable investigation, the failure to pay the statutory minimum until ordered to do so, and disparaging comments about Mr. Khan made to the employment standards officer and to the student newspaper. The amount was kept in the lower half of the recognized range because the conduct did not reach the level seen in the leading authorities and because Mr. Khan's prompt re-employment tempered the harm.¹⁵ The Court declined to award punitive damages, finding the compensatory award sufficient and observing that URSU was an “embattled students' union that is being liquidated” rather than an organization that needed to be deterred.¹⁶ Claimed relocation costs were denied as unproven and not caused by the dismissal.¹⁷
Key Takeaways
Khan is a clear reminder that the wording of a termination clause matters enormously, and that the benefit of clarity can run in either direction. Where an employer promises a fixed sum on termination without expressly reserving the right to deduct mitigation earnings, that sum may be owed as a debt and payable in full, even to an employee who finds better work within weeks. Employers who want mitigation to apply should say so in plain language.
The decision also confirms that just cause for absenteeism remains a high bar. Failure to investigate, warn, and document before dismissing, or expanding or shifting the alleged grounds after the fact undermines an employer’s case for cause. Further, failure to make prompt payment of statutory minimums, failure to conduct a fair investigation, and lack of restraint in describing a former employee to regulators or the media can also create exposure to moral damages.
For employees, a clearly drafted severance clause can be worth considerably more than common-law notice precisely because it may be immune from mitigation. Before signing or relying on such a clause, both parties would be wise to seek legal counsel.
Finally, this case reflects a more recent trend of the Court being open to using the summary judgment procedure to determine wrongful dismissal claims even where just cause is alleged and facts are in dispute. This can provide wrongfully terminated employees with a potentially more cost-effective means of getting their claims heard than was traditionally the case in Saskatchewan.
¹ Khan v Students' Union of the University of Regina Inc., 2026 SKKB 94 (CanLII) [Khan].
² Ibid at para 12-13.
³ Ibid at para 24.
⁴ Ibid at para 63-65.
⁵ Ibid at para 27. See also The Saskatchewan Employment Act, SS 2013, c S-15.1, s 2-60.
⁶ Ibid at paras 31-39.
⁷ Ibid at paras 40-41, citing Thomas v Saskatchewan Indian Gaming Authority Inc., 2021 SKCA 164.
⁸ Ibid at paras 47-51, 54-55.
⁹Ibid at paras 66, 69-70.
¹⁰ Ibid at para 72.
¹¹ Ibid at paras 74-78, applying Tanel v Rose Beverages (1964) Ltd. (1987), 57 Sask R 214 (CA) and Crook v Duxbury, 2020 SKCA 43.
¹² Ibid at paras 88-93.
¹³ Ibid at paras 95-97.
¹⁴ Ibid at paras 108-115, citing Saskatchewan Indian Gaming Authority Inc. v Pasap, 2025 SKCA 15 and Capital Pontiac Buick Cadillac GMC Ltd. v Coppola, 2013 SKCA 80.
¹⁵ Ibid at paras 109 and 115.
¹⁶ Ibid at para 117.
¹⁷ Ibid at para 100.