In Lake v. La Presse, 2022 ONCA 742, the Court of Appeal determined that the motion judge erred in reducing the employee's reasonable notice period by two months for failing to mitigate her damages.
The employee was employed by the Company for five-and-a-half years as a General Manager and was dismissed in 2019 on a without cause basis because the Company decided to close its Toronto office. The employee commenced an action for wrongful dismissal and brought a motion for summary judgment. It was undisputed by both parties that the employee was entitled to reasonable notice at common law.
On the summary judgement motion, the motion judge determined that the employee was entitled to a reasonable notice period of eight months. However, "[t]he motion judge concluded that the steps taken by the [employee] to mitigate her damages were not reasonable in the following ways: (a) she waited too long before beginning her job search; (b) she "aimed too high" in applying for vice-president roles and she should have been applying for less senior roles if she continued to remain unemployed; and (c) she waited too long before applying for any jobs and she applied to very few jobs" (para 7).
Consequently, the motion judge reduced the notice period by two months and awarded the employee six months' pay in lieu of notice. The employee appealed the motion judge's decision and asserted that the motion judged erred in both parts of the mitigation analysis:
At the first stage of the analysis, the motion judge erred in concluding that the appellant had not taken reasonable steps to mitigate her damages. The [employee] argues that: (i) the motion judge misapprehended the evidence when concluding that the [employee] waited too long to begin her job search; (ii) the motion judge erred in principle by suggesting that the [employee] should have eventually applied for lesser paying positions, and (iii) the motion judge made a palpable and overriding error by concluding that the [employee] "aimed too high" and focused her job search on roles that represented a promotion over her prior role. At the second stage of the analysis, the motion judge erred by making an assumption in the absence of evidence and reducing the [employee's] damages without finding that the [employee] would have found a comparable position if she had taken reasonable steps in mitigation (para 9).
The Court allowed the employee's appeal. The Court determined that the motion judge erred in both parts of the mitigation analysis and awarded the employee the full eight months' pay in lieu of notice.
In arriving at this decision, the Court reviewed the relevant legal principles regarding the mitigation of damages for wrongful dismissal. The Court reiterated that "[t]he duty to mitigate is based on the premise that the defendant is not responsible for losses that a plaintiff could reasonably have avoided", and that "[w]hile a terminated employee has a duty to take reasonable steps to mitigate, the onus is on the defendant to demonstrate that the plaintiff could reasonably have avoided a loss or that she acted unreasonably in failing to do so" (paras 11-12). In short, "[t]he defendant must prove: (1) that the plaintiff failed to take reasonable steps to mitigate her damages; and (2) that if she had done so she would have been expected to secure a comparable position reasonably adapted to her abilities" (para 12).
In regards to the first step of the mitigation analysis, the Court found that although it was open for the motion judge to find that the employee waited too long before beginning her job search, the motion judge erred in concluding that "in mitigation, after a reasonable period of attempting to find similar employment, a dismissed employee must begin searching for a lesser paying job" (para 19). The Court clarified that "[t]he obligation of a terminated employee in mitigation is to seek "comparable employment", which typically is employment that is comparable in status, hours and remuneration to the position held at the time of dismissal" and that there "... was no obligation for the [employee], to seek out less remunerative work, including by working as a sales representative" (para 19).
In addition, the Court found that the motion judge erred in concluding that the employee "aimed too high when she applied for vice-president positions and had focused her job search on roles that would represent a promotion over her prior role" (para 21). The Court found that the Company offered no evidence to counter the employee's evidence "... that the vice-president positions had similar job responsibilities to her previous employment, and that opportunities in the industry at the time were limited." Accordingly, the record did not support the motion judge's conclusion that the employee failed to make reasonable efforts to mitigate her damages.
In regards to the second step of the mitigation analysis, the Court found that "... there was no evidence to support the inference that, if [the employee] had applied for other positions, the [employee] would have found comparable employment" (para 33).
Takeaways for Employers
This case is a reminder to employers that they face a heavy burden in establishing that a former employee has failed to mitigate their damages. A dismissed employee is only required to seek comparable employment and is not required to mitigate their losses by seeking out less remunerative work. In addition, an employer must adduce facts which would support a reasonable inference that had the dismissed employee applied for comparable positions, the employee would have found comparable employment.
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