A fundamental principle of wrongful dismissal damages holds that damages compensate employees just for their actual economic loss. An employee awarded 20 months’ pay after being wrongfully dismissed is only entitled to recover the income they have lost during those 20 months. An employee who finds work after 10 months will only receive the income they lost during the 10 months they were looking for a job, not for the full 20 months.
If the employee’s job pays $10,000 per year less than they would have earned from the employer who wrongfully dismissed them, the employee receives
- their full lost income for the 10 months they were unemployed and
- the $10,000 difference in pay for the remaining 10 months
A recent Ontario Court of Appeal decision is challenging this principle.
B’s Wrongful Dismissal
A woman, B, started working at a McDonald’s restaurant in Newfoundland in 1986, then later moved to Ottawa. B was working as a manager at an Ottawa McDonald’s when McDonald’s dismissed her without any notice or any of her statutory minimum payments upon dismissal.
McDonald’s reviewed her work very favourably for many years. Suddenly, B received a series of critical performance evaluations. McDonald’s management offered her a choice: demotion, under which she would report to employees she had trained and supervised, or dismissal. B refused to be demoted and walked out, never to return.
While working at McDonald’s, B worked part-time at Sobeys. B found employment at Home Depot after McDonald’s dismissed her. B brought action against McDonald’s for wrongful dismissal.
The Court Decides New Income Earned Need Not Be Deducted From A Damage Award
At trial, the Ontario Superior Court held B was wrongfully dismissed and awarded B $104,500 for 28 weeks of termination and severance pay. B was also awarded 20 months of wrongful dismissal damages. The court had to decide whether her income from working at Sobey’s and Home Depot should be deducted from the damage award.
The court did not deduct the 28 weeks of B’s severance pay from her 20 months of B’s wrongful dismissal damages. It did not deduct B’s income from Sobey’s and Home Depot from the damages either, although this was the established practice. The courts held that
- B had been working at Sobey’s before the wrongful dismissal. It was not new employment and should not be deducted from the damage award
- B’s work at Home Depot was ‘sufficiently inferior’ to her position at McDonald’s
The court concluded income from the new position does not have to be deducted if an employee’s new work after a wrongful dismissal is ‘sufficiently inferior’ to the position they held when wrongfully dismissed.
McDonald’s Appeals to the Court of Appeal
The Ontario Court of Appeal upheld the lower court’s decision. A wrongfully dismissed employee must try to mitigate their economic loss and their damages. However, a wrongfully dismissed employee may be forced by their circumstances to accept a much inferior position compared to the one they were dismissed from. The income the wrongfully dismissed employee earns working at such a position is not deductible from the damage award.
This decision gives wrongfully dismissed employees additional arguments why new income should not be deducted from their damage awards. If you believe that you are in this situation, consult an experienced employment law lawyer to determine if your damage award should take this factor into account or if your existing damage award should be reassessed.