Mitigation Requirement After Termination Further Explained by Ontario’s Highest Court

Typically, when an employee makes a claim for common law wrongful dismissal damages, he or she is required to make reasonable efforts to mitigate their damages. Mitigation often requires the employee to try and attain another job in the period after their dismissal. Any income earned within the common law reasonable notice period may be deducted from the total damages that the employer would otherwise have to pay, and, if an employee did not make a reasonable attempt to mitigate, the employer’s damages may be reduced by the amount the employee would have reasonably earned, had the employee mitigated.

The Court of Appeal’s decision in Brake v. PJ-M2R Restaurant Inc. marks a significant shift in the interpretation of this principle.

In this decision, Ontario’s highest court chose not to deduct any monies from an employee’s damages award when she took a job that was far inferior – both with respect to compensation and prestige — from the job she previously held before termination.

Esther Brake was a long-serving employee of McDonald’s. In 1999, after working at McDonald’s in Newfoundland, she was hired as a restaurant manager by PJ-M2R at a McDonald’s franchise in Ottawa.

From 2000 to 2010, Brake – who also worked as a cashier at Sobey’s – received a rating of “excellent” or better in all of her annual performance evaluations.

In August 2012, after a series of negative performance reviews, Brake was given a choice between accepting the lesser position of “First Assistant” and being fired. Brake refused to accept the demotion, saying that it would be humiliating to report to younger and less experienced people who she had trained and supervised.

At the age of sixty-two, Brake left her job. She commenced an action against PJ-M2R for wrongful dismissal.

Brake continued to work at Sobey’s and applied for several jobs, eventually accepting a position at Home Depot at a wage of $12.50 per hour, a marked decrease from her salary at McDonald’s.

As we discussed in our 2016 blog McNotice of 20 Months for Constructive Dismissal, the trial judge found that the complaints about Brake’s performance did not amount to cause for dismissal and set a notice period of twenty months, with no amounts deducted for mitigation for her income earned at Sobey’s and Home Depot. Brake was awarded $104,499.33 plus pre-judgment interest and costs.

PJ-M2R appealed.

Relying on the historical principles regarding mitigation of damages, PJ-M2R submitted that Brake’s refusal to accept the position of First Assistant amounted to a failure to mitigate, and that her earnings from the jobs she held during the notice period should be deducted from any damages award.

The Court of Appeal disagreed.

The Court held that Brake was not obliged to accept the demotion in order to mitigate her damages, upholding the trial judge’s finding that the lesser position would have been humiliating for Brake, and therefore not something that a reasonable person would accept

With respect to deductions, the Court of Appeal made three key findings:

• Employees’ income earned during the statutory notice period will not be deducted;
• Employees’ income earned from employment that was, at one point, simultaneous with income earned from the terminating employer, will not be deducted so long as that employer permitted such simultaneous employment; and,
• Employees’ income earned from new employment that is far inferior to their previous employment will not be deducted if it was accepted out of necessity.

The Court upheld previous decisions where it was determined that income earned during the statutory notice period is not considered mitigation earnings: Brake was entitled to receive her full statutory entitlements even if she secured a new full-time job right after PJ-M2R terminated her employment. Further, Brake’s income from Sobey’s was not deductible because she had worked there while working full-time for PJ-M2R and, as such, that income should be considered a supplement, rather than a substitute, for the salary earned at McDonald’s. Perhaps most importantly, the Court declined to deduct Brake’s income from Home Depot because this job was not comparable to her employment with PJ-M2R and she accepted it out of necessity.

Accordingly, PJ-M2R’s appeal was dismissed.

Key Takeaways

Employers have always had the burden of convincing the courts that wrongful dismissal damages ought to be reduced to reflect the real value of an employee’s losses over the notice period. The Brake decision makes it clear that this is an onerous burden, and that an employer advancing mitigation arguments needs to go beyond simply establishing that income was earned during the notice period. The Court of Appeal had signaled that income will not be deducted in certain circumstances.

Moreover, where an employer presents an alternate job offer to an employee in order to mitigate damages, the court will undertake an analysis to determine whether the employee is obliged to accept the position. Other than monetary considerations, such an analysis may also involve non-tangible factors, such as work atmosphere, stigma and loss of dignity.

Additional link to a wrongful dismissal post:

Big Notice Win for Long Term Employee

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