Recent Developments: An Employee’s Duty to Mitigate

Recent Developments: An Employee's Duty to Mitigate

By Victoria J. Petrenko

Canadian Courts have recently considered different aspects of an employee's duty to mitigate their damages resulting from a wrongful dismissal. These decisions of the Supreme Court of British Columbia and the Ontario Court of Appeal provide helpful guidance as to the nature of the duty and the significance of the type of the new employment obtained.

In Schinnerl v Kwantlen Polytechnic University, 2016 BCSC 2026, the BC Supreme Court considered whether a dismissed employee's acceptance of a part-time position and refusal of full-time employment constituted a failure to mitigate. The plaintiff, 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 Ms. Schinnerl to conduct reasonable job searches to obtain alternative employment. Furthermore, the offer stipulated that if she were to find employment with a public sector employer and receive less than her salary with Kwantlen, Kwantlen would pay her the shortfall during the remainder of the 10 month continuation period. Ms. Schinnerl did not accept the offer, but Kwantlen began to pay her in accordance with the terms of its offer.

Approximately 3 and a half months after the termination of her employment by Kwantlen, the plaintiff found employment with Douglas College and accepted a position 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 the termination of her employment from Kwantlen.

Kwantlen ended the plaintiff's salary continuation after three months when she started her new job with Douglas College. At trial, Kwantlen argued that it was unreasonable for her to decline the opportunity to work full-time, and therefore Kwantlen's obligation to pay her a salary in lieu of notice ended when she began working at Douglas College. Ms. Schinnerl argued that it was reasonable for her 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 Ms. Schinnerl's interests to work part-time instead of full-time. However, this was a separate matter from her duty to mitigate the damages arising from the loss of her employment with Kwantlen. At paragraph 36, the Trial Judge stated:

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" (see paragraph 39).

In Brake v PJ-M2R Restaurant Inc., 2017 ONCA 402, the Ontario Court of Appeal considered the question of what types of income can be deducted from an award of damages for wrongful dismissal. In this case, 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 her duty to mitigate her damages, the Trial Judge found that Ms. Brake had made "reasonable best efforts" to find comparable, full-time work after her employment with PJ-M2R was terminated, but ultimately had been unsuccessful. Ms. Brake eventually obtained employment during the notice period in a grocery store and as a cashier at Home Depot. The Trial Judge held that these positions were "substantially inferior to the managerial position" she had as a McDonald's restaurant manager, and in a novel approach, he did not reduce the damage award to account for the income Ms. Brake earned during the notice period while working at the grocery store and as a cashier at Home Depot.

PJ-M2R, the McDonald's franchise holding company that 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 offer1. It would have been unreasonable for Ms. Brake to accept the demotion; therefore her refusal was not a failure to mitigate. On the second point, the Ontario Court of Appeal also dismissed the Appellant's argument, and declined to reduce the damage award by the amount of income Ms. Brake had received during the notice period while employed in the "substantially inferior" positions.

The Ontario Court of Appeal treated the income Ms. Brake received from the grocery store differently from the income received at Home Depot. Ms. Brake had worked at the grocery store while she was employed as a McDonald's restaurant manager. The Court 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"; therefore, this was not income earning in mitigation of her damages, and the Court declined to deduct this income from her damages.

The "modest" income Ms. Brake received from Home Depot was also not deducted by the Court, 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 to satisfy the duty to 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 pay2.

The impact of this decision in Ontario is likely to be significant, but it remains to be seen whether other provinces, such as British Columbia, will adopt this approach. Time will tell whether this question will need to be answered by the Supreme Court of Canada, or whether BC will follow the approach taken by the Ontario Court of Appeal, and conclude that income earned by a plaintiff from "inferior" or non-comparable positions during the notice period are not deductible from a damages award for wrongful dismissal against an employer.

Conclusions

In a wrongful dismissal action, employees must make reasonable efforts to mitigate the damages that flow from the termination of their employment. This duty is most commonly discharged by actively seeking and obtaining comparable, alternative employment. These recent decisions by the Courts in BC and Ontario provide important guidance on what the law requires in terms of mitigation, particularly with respect to what it means to make "reasonable" efforts:

  • Employees must make reasonable efforts to mitigate any loss and damages that arise as a result of the termination of their employment by searching for comparable employment. Failure to do so will be taken into account in determining whether there are any damages for wrongful dismissal.
  • As the Schinnerl decision states, terminated 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 the plaintiff's entitlement to damages, particularly where the individual has had the opportunity to fully mitigate their damages and elects not to do so.
  • As a result of the Brake judgment, an employee's inability to find "comparable employment" and a decision to accept "inferior" employment might result in the income earned from the inferior position not being deducted from the award of damages for wrongful dismissal.
  • In BC, all income earned by the plaintiff during the reasonable notice period will be deducted from the damages awarded in a successful wrongful dismissal proceeding. If the Courts in BC were to follow the Brake decision of the Ontario Court of Appeal, it would represent a significant change in the way damages are currently assessed in this province in wrongful dismissal proceedings.

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

2 Brake, supra, at paragraph 158.