Outstanding Criminal Charges Affect Employee’s Duty to Mitigate

Written by on February 6, 2009 in Employment Law Blog, Mitigation

Clark v. BMO Nesbitt Burns Inc. – Ontario Court of Appeal – Oct. 1, 2008

An employee who has outstanding criminal charges against them prior to being terminated may be given more latitude by the Courts regarding what is considered reasonable employment for the purposes of mitigation.

The recent decision by the Ontario Court of Appeal on October 1, 2008 in Clark v. BMO Nesbitt Burns Inc. [2008] O.J. No. 3789 (“Clark”), provides a look at how outstanding criminal charges against an employee may affect the employee’s ability to successfully mitigate their damages. More specifically, the Courts may provide more latitude to the employee with respect to fulfilling their duty to mitigate if outstanding criminal charges are present.

In Clark, the employee worked for the employer as an Investment Banker for seventeen years. In his last year of employment, the employee was charged with sexual assault of his common-law partner. One month after the charge was laid, the employer announced that the branch in which the employee worked was being closed and as a result, the employee was terminated. The employee asked if he would be permitted time to sell his book of business, but the employer refused. The employer offered the employee fifteen months’ pay in lieu of notice. The amount was rejected and the employee sued the employer for wrongful dismissal.

Following his termination and prior to the Trial, the employee contacted three brokerage firms about possible employment opportunities as an Investment Banker. The employee disclosed his pending criminal charges and was not hired. Given the difficulty he was experiencing trying to obtain comparable employment, the employee decided to start his own business, an athletic training business, which was something he had been interested  in doing prior to termination.  However, as the costs of starting up the business were considerable, the business did not yield any net income in the eighteen months that followed the employee’s termination.

At Trial, the Judge determined that the criminal charges that had been laid against the employee would make it difficult for the employee to find new comparable employment as an Investment Banker.  Furthermore, the Trial Judge held that since the employee was innocent until proven guilty in relation to the charges laid against him, the employee could not be held responsible for the negative effects the charges had on his ability to secure new comparable employment. Due to these circumstances, the Trial Judge found that the employee’s decision to develop an athletic training business was rational. Therefore, the Trial Judge concluded that the employee had met his duty to mitigate and awarded the employee eighteen months’ pay in lieu of notice and Wallace damages in the amount of three months due to the employer’s refusal to provide the employee with an opportunity to sell his book of business. The employer appealed this decision to the Ontario Court of Appeal.

The Court of Appeal allowed the appeal in part by affirming the amount of notice awarded, but setting aside the Wallace damages, stating, “the award of Wallace damages must be set aside for one simple reason: in the circumstances of this case, it amounted to double recovery for [the employee].” In regards to the amount awarded by the Trial Judge for pay in lieu of notice, the Court stated, “[I]n the present case the trial judge made no finding that [the employee] had failed to make reasonable efforts to find alternate employment. While an argument could be made that [the employee’s] inability to obtain employment after conviction was due to his own conduct, such an argument cannot succeed in light of the trial judge’s finding that by the time the conviction was entered, [the employee] would have been unable to take up a position as an investment advisor because his book of business had been retained by the [employer] and, given his age, it was not viable for [the employee] to start afresh in such a position.” Furthermore, the Court stated, “In the circumstances, there is no basis on which to take issue with the trial judge’s finding that [the employee’s] decision to develop his athletic business was rational or his determination that [the employee] took reasonable steps to mitigate.”

The decision in Clark demonstrates that a Court will consider the negative effects that outstanding criminal charges may have on an employee’s ability to find new comparable employment.  In such circumstances, it seems that an employee will be given more latitude in fulfilling their duty to mitigate. This point is important for both employees and employers as it permits the employee to seek alternate employment or even self-employment, which may not otherwise be viewed as fulfilling their duty to mitigate.

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