Canada: Overholt Law Newsletter August 2017 The Meaning Of Mitigation: Recent Legal Developments

Last Updated: August 29 2017
Article by Victoria Petrenko

Canadian courts have recently revisited the issue of employee mitigation in wrongful dismissal proceedings. Two cases from BC and Ontario illustrate what an employee's obligations are to mitigate his or her losses during the reasonable notice period, particularly where unique factors are present. These cases help clarify what reasonable steps are required in order for an employee to discharge their duty to mitigate.

British Columbia: Schinnerl v Kwantlen Polytechnic University1

The BC Supreme Court recently considered whether the election of part-time over full-time employment constitutes a failure to mitigate.

A 48 year old employee with 8.5 years of service was dismissed without cause and offered salary and benefits continuation for a period of 10 months. As part of the offer, the defendant, Kwantlen Polytechnic University ("Kwantlen"), required the employee to conduct reasonable job searches to obtain alternative employment. Furthermore, the offer stipulated that if the employee were to find employment with a public sector employer and receive less than her salary with Kwantlen, Kwantlen would pay the employee the shortfall during the remainder of the 10 month continuation period. The employee did not accept the offer, but Kwantlen began to pay the employee in accordance with the offer's terms.

The employee later found employment with Douglas College. However, the employee elected to work on a part-time basis so that she could also pursue doctoral studies. Had she accepted full-time employment, her salary would have been more than what she was earning at the time of her termination of employment from Kwantlen.

Kwantlen ceased payment to the employee after three months and after the employee started her new job with Douglas College. At trial, Kwantlen argued that it was unreasonable for the employee to decline the opportunity to work full-time, and therefore any obligation for Kwantlen to pay salary in lieu of notice ended when she began working at Douglas College. The employee argued that it was reasonable to work part-time in order to facilitate her doctoral studies. It was "in her own interests" to work part-time and pursue her education concurrently.

The Trial Judge agreed that it may have been in the employee's interests to work part-time instead of full-time. However, this was a separate matter from her duty to mitigate her damages arising from the loss of her employment with Kwantlen. At paragraph 36:

By turning down full-time work at Douglas College but then seeking damages for full-time work she is essentially claiming that her former employer should pay for part of her continuing education. It is true that the education commenced with the defendant but its obligation to contribute ended under its educational leave policy as well as with the plaintiff's dismissal.

The Trial Judge found that Kwantlen's obligation to pay the employee ended in June of 2016, when the employee began work at Douglas College. This was "the date the plaintiff had the opportunity to work full-time and mitigate all of her damages after that date".

Ontario: Brake v PJ-M2R Restaurant Inc.2

The Court of Appeal in Ontario recently looked at what income an employee receives during the notice period must be deducted from an award of damages.

A 62 year old McDonald's restaurant manager with over 25 years of service was dismissed without notice or pay in lieu of notice. The dismissal came after the employee, Ms. Esther Brake, was told that she had to accept a demotion or she would be fired. Ms. Brake refused to accept the new position on the basis that, after 25 years, a demotion would be "embarrassing and humiliating". Instead of responding to her employer, she initiated legal proceedings and claimed she had been constructively dismissed.

At trial the Judge found that Ms. Brake had been constructively dismissed and awarded damages based on a 20-month notice period. With respect to mitigation, the Trial Judge found that Ms. Brake made "reasonable best efforts" to find comparable, full-time work after her employment with PJ-M2R was terminated, although she was ultimately unsuccessful. Although she eventually obtained employment during the notice period, it was in positions that were "substantially inferior to the managerial position" she had as a McDonald's restaurant manager. The Trial Judge accordingly did not reduce the damage award to account for the income Ms. Brake earned during the notice period while working at a grocery store and as a cashier at Home Depot.

PJ-M2R, a McDonald's franchise holding company that owned several McDonald's restaurants in the Ottawa area and employed Ms. Brake, appealed the trial decision. The appeal was premised, in part, on the basis that Ms. Brake's refusal to accept the demotion amounted to a failure to mitigate, and that the trial judge had failed to properly account for the income that Ms. Brake earned during the notice period.

The Court dismissed the first argument, citing long standing case law which holds that where an employer offers an employee a chance to mitigate damages by accepting a different position, the issue is whether a reasonable person in the employee's position would have accepted the offer3. It would have been unreasonable for Ms. Brake to accept the demotion, and her refusal was not seen as a failure to mitigate. On the second point, and in a more novel approach, the Court of Appeal also dismissed the Appellant's argument, and declined to reduce the damage award by the amount of income Ms. Brake received in her "substantially inferior" positions.

The Court of Appeal treated the income Ms. Brake received from the grocery store and from Home Depot differently. Ms. Brake had worked at the grocery store while she was still employed as a McDonald's restaurant manager. The Court of Appeal concluded that this source of income would have continued had she not been wrongfully dismissed. The work for the grocery store and the work for PJ-M2R were not "mutually exclusive", and the Court declined to deduct this income from her damages.

The "modest" income Ms. Brake received from Home Depot was also not deducted, though different considerations applied. In a concurring judgment, Justice Feldman reiterated the law of mitigation and noted that an employee does not have to accept a position that is not comparable in either salary or responsibility in order to successfully mitigate. Justice Feldman went on to make the following comments:

It follows, in my view, that where a wrongfully dismissed employee is effectively forced to accept a much inferior position because no comparable position is available, the amount she earns in that position is not mitigation of damages and need not be deducted from the amount the employer must pay 3.

The impact of this decision in Ontario is likely to be significant, but it remains to be seen how other provinces, such as British Columbia, will respond. Time will tell whether BC will follow the approach taken by the Ontario Court of Appeal, particularly with respect to income earned from "inferior" or otherwise incomparable positions.

Takeaways

Employees must make reasonable efforts to mitigate any damages that flow from the termination of their employment in a wrongful dismissal action. This duty is most commonly discharged by actively seeking and obtaining comparable, alternative employment. These decisions by the courts in BC and Ontario provide useful reminders on the law of mitigation, and

  • Employees must make reasonable efforts to mitigate any damages that arise as a result of a wrongful termination. Failure to do so will impact any damages awarded in litigation.
  • Employees are expected to find comparable employment in their efforts to mitigate their damages.
  • As the Schinnerl decision suggests, employees are entitled to pursue their own self-interests after their employment has come to an end, which may involve returning to school or pursuing other opportunities. However, this may have an impact on an employee's entitlement to damages, particularly where the employee has had the opportunity to mitigate their damages and elects not to do so.
  • In BC, income earned by the employee during the notice period will be deducted against any damages awarded in a successful wrongful dismissal claim. If the Courts in BC were to follow the Brake decision from the Ontario Court of Appeal, it could signal a significant shift in the way damages are assessed in wrongful dismissal proceedings.

Footnotes

1 2016 BCSC 2026.

2 2017 ONCA 402.

3 See Evans v Teamsters, Local 31, 2008 SCC 30.

4 Brake, supra, at paragraph 158.

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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