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Court of Appeal Rules Not All Income Earned During Reasonable Notice Period Will Be Deducted From Wrongful Dismissal Awards

September 22, 2017

Court of Appeal Rules Not All Income Earned During Reasonable Notice Period Will Be Deducted From Wrongful Dismissal Awards

Historically, a duty to mitigate applied in all wrongful dismissal cases.  This meant that monies earned by an employee during the reasonable notice period were deducted from wrongful dismissal damages award.  However, in Brake v PJ-M2R Restaurant Inc., the Ontario Court of Appeal did not deduct any monies from an employee’s damage award following her termination (despite her earning income during the reasonable notice period).  This marks a significant shift in the principle that all income earned by an employee during the reasonable notice period can be deducted from a wrongful dismissal award.
The employee was a long-serving restaurant manager at a McDonald’s franchise in Ottawa.  She also worked part-time at Sobey’s.  The employer gave the employee an ultimatum that she accept a demotion to the position of “First Assistant” or be fired. The employee refused and her employment was terminated.
Following termination, the employee was only able to find work in positions that were “substantially inferior” to the managerial position she held with the employer.   She eventually accepted a position as a cashier at Home Depot.
Using the historical principles regarding mitigation of damages, the employer submitted that:

  • The employee’s refusal to accept the position of First Assistant with the employer amounted to a failure to mitigate;
  • The employee’s income from her Sobey’s job should be deducted from any damage award; and
  • The employee’s earnings at Home Depot should be deducted from any damage award.

The Court of Appeal disagreed with the employer on every count.  Specifically, it found:

  • A reasonable person in the employee’s position would not have accepted a demotion to First Assistant;
  • Any income the employee could have earned while continuing the first job (i.e. the Sobey’s income) was not deductible from a damage award; and
  • Any amounts received from Home Depot stemmed from a “substantially inferior” job and, therefore, did not diminish the loss of the position with the employer. As such, these amounts are were not deducted from the damage award.

It remains to be seen whether Courts will apply this “substantially inferior” threshold when assessing the deduction of mitigation income.  Nevertheless, the Court of Appeal’s decision in Brake will make mitigation submissions even more difficult for employers and will likely lead to larger damages awards in wrongful dismissal cases.
If you have any questions about this topic or any other questions relating to workplace law, please do not hesitate to contact a Mathews Dinsdale lawyer
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