Canada: Wrongful Dismissal On Summary Judgments: What If Judgment Is Rendered Before The Notice Period Expires?

Last Updated: February 17 2016
Article by A. Irvin Schein

The new judicial policy promoting summary judgment motions as a way of disposing of law suits, rather than trials, has become all the rage in lawful dismissal litigation. Counsel acting for wrongfully dismissed employees, who often operate on a contingency basis, have welcomed this development for obvious reasons. The courts appeared to be totally receptive. However, there is still one aspect of a typical wrongful dismissal case that may require a special treatment where the case is brought to court on a summary judgment motion.

In most wrongful dismissal cases, mitigation is raised by the former employer as part of its defence. Terminated employees have a duty to make reasonable efforts to mitigate their loss of income by finding new employment.  If a plaintiff fails to make reasonable efforts to find new employment, the court may reduce what would otherwise have been a reasonable notice period.

This may give rise to a problem under the following scenario. Assume that an employee loses his job and sues promptly for damages for wrongful dismissal fairly promptly. The action is defended and the plaintiff brings a motion for summary judgment.  Assume that the motion for summary judgment is heard only a few months after the actual termination has taken place.

At that point, the motions judge will be asked to determine the notice that should have been provided to the plaintiff by the former employer. Now assume that the period of reasonable notice as set by court extends beyond the period of time between the termination and the hearing of the motion. The court may rule that up to the date of the motion, the plaintiff has made reasonable attempts to find another job.  What is the court to do about the fact that the period of reasonable notice will extend into the future?  How is the court to make sure that the plaintiff continues to seek new employment? And what happens to the judgment if the plaintiff actually does find new employment before the end of the notice period?

This is a relatively new problem. Historically, wrongfully dismissed plaintiffs did not bring motions for summary judgment because the courts were not interested in hearing them. This problem did not arise.

The recent case of Lalani v. Canadian Standards Association summarizes the law on the point and adds a new option for the court to consider.

Traditionally, the court employed 3 different approaches to the problem of a motion being heard before the end of the notice period.

Firstly, the court could order that the plaintiff's damages would be discounted by a contingency for re-employment during the balance of the notice period.

Secondly, judgment could be granted subject to a trust in favour of the employer. In the event that the employee did find a new job during the notice period, he would have to account to the employer in the sense that portion of the judgment covering the period in which the employee now had a new a job would have to be refunded.

Thirdly, the court could grant the employee a partial summary judgment for the period up to the date of the motion. The parties would then have to return to court on a subsequent date, either once the employee had a new job or following the end of the notice period, for a determination of the balance payable to the employee.

In the Lalali case, the motion court judge put forward a fourth approach, which a judge described as a hybrid between the second and third approaches previously used by courts.

In this case, the judge granted a judgment for the full amount. The funds paid to the plaintiff during the balance of the notice period were impressed with a trust in favour of the employer.  However, the plaintiff was ordered to account to the employer on a monthly basis with respect to his mitigation efforts and any mitigation income earned during the notice period from a new job.  The judge's hope was that in the way, the parties might be able to avoid the time and expense involved in returning to court on a future date to deal with any refund to which the employer was entitled.

Each of these approaches brings with it advantages and disadvantages. When it comes to mitigation, regardless of the approach taken, much will depend the honesty and good faith of the former employee in terms of his willingness to report on his or her having found new employment, and the legitimate start date of that employment.

There is yet a further approach, of course, which is to develop a policy of refusing to entertain motions for summary judgment in wrongful dismissal cases where the hearing date is likely to pre-date the expiry of the reasonable period of notice. That would avoid the problem but, on the other hand, it would also deprive a terminated employee of what might be much needed income during a period of unemployment.  It is also inconsistent with the current policy encouraging motions for summary judgment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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A. Irvin Schein
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