Canadian jurisprudence has long held that during the period of reasonable notice, employees have a corresponding duty to mitigate their damages. Employees are expected to make reasonable efforts to find alternate employment during the notice period, failing which a court will reduce the damages awarded.
In a decision released this month, Brake v. P.J-M2R Restaurant Inc, the Court of Appeal held that any mitigation income earned during the statutory entitlement period or income earned from a secondary job, held concurrently with the first job and which supplements income, will not be deducted from a damage award. This decision, which heavily favours employees, changes the landscape of mitigation in Ontario.
In 1999, Ms. Brake was hired as a restaurant manager by PJ-M2R at the Ottawa McDonald's location. Ms. Brake had previously worked at McDonald's in Newfoundland and PJ-M2R recognized seven (7) years of her seniority. In 2012, after receiving a negative performance review and being faced with the prospect of being terminated or accepting a demotion, Ms. Brake left her job and sued for constructive dismissal. During this time period, Ms. Brake continued working part-time as a cashier at Sobey's; a position she held concurrently while working at McDonald's. Additionally, Ms. Brake worked at a Tim Horton's and Home Depot, in low level positions after she left McDonald's.
The trial judge found that Ms. Brake was constructively dismissed and awarded her twenty (20) months of notice, inclusive of her statutory entitlements. The trial judge chose not to reduce the amount of damages awarded by any of the mitigation income earned by Ms. Brake during the notice period. Understandably, PJ-M2R chose to appeal the decision, arguing that the trial judge erred in the treatment of mitigation income earned during the notice period.
No Mitigation during the Statutory Notice Period
The Court of Appeal held that statutory entitlements were not subject to mitigation, and therefore any income earned during the statutory entitlement period was not deductible mitigation income. In reaching this conclusion, the court followed the line of reasoning set out by the Divisional Court in Boland v. APV Canada Inc.
The court further held that the trial judge should have determined the employee’s statutory entitlement period and identified which parts of the mitigation income were attributable to the statutory period and which were attributable to the balance of the notice period. For reasons that are not entirely clear, the court was unable to determine when Ms. Brake’s statutory entitlement period expired. Furthermore, the court placed the burden of proof on employers to prove what employment income is attributable to the statutory notice period and what employment income is attributable to the balance of the notice period when an award of blended damages is made.
No Mitigation from concurrently held employment which was permitted by the employer
The court further held that it was open to the trial judge to make no deduction for the employment income earned by Ms. Brake while working at Sobey’s and Home Depot. The court held that:
if an employee has committed herself to full-time employment with one employer, but her employment contract permits for simultaneous employment with another employer, and the first employer terminates her without notice, any income from the second employer that she could have earned while continuing with the first is not deductible from her damages.
The court noted that Ms. Brake had worked at Sobey’s while working full time for PJ-M2R, and had she continued to work at PJ-M2R she would have continued to supplement her income through this part-time work. As such, the court found it was unnecessary to deduct the income Ms. Brake earned from Sobey’s during the balance of the notice period. At what point supplementary income earned rises to a level where it should be treated as deductible mitigation income was left by the court for another day.
Takeaway for Employers
In this case, Ontario’s highest court confirmed that any mitigation income earned during the statutory entitlement period is not deductible from damages. This is troubling for employers, especially when dealing with long service employees, who may be entitled to a maximum 34 week statutory entitlement period.
The court did not clarify whether employees had an obligation to begin their mitigation efforts during the statutory entitlement period regardless of whether the income earned would be deducted from damages. As such, this decision may result in employees choosing not to start their mitigation efforts until after the expiration of the statutory entitlement period.
The foregoing is for informational purposes only, and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of SOM LLP’s lawyer’s by email or telephone.