A wrongful dismissal occurs when an employer does not provide enough notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. During the notice period, an employee is subject to the “duty to mitigate”, which means she must look for alternative employment. Notice periods can be as long as 24 months, and even longer in exceptional circumstances. Increasingly, wrongful dismissal cases are getting to court before the reasonable notice period has expired because lawyers are now bringing summary judgement motions. In these cases, the employee is still subject to the duty to mitigate for the balance of the notice period. Ontario judges have applied at least 4 different approaches in these kinds of cases, namely:
The Contingency Approach: Under this approach, the employee’s damages are reduced based on the possibility (or contingency) that the employee will find a new position before the expiration of the notice period. The damages may be reduced by a percentage (e.g. deducting 5% of total money award) or by months (e.g. deducting a month from the total notice period period).
The Trust and Accounting Approach: Under this approach, the employee is granted judgment in the form of a lump sum, but a trust in favour of the employer is impressed on any earnings of the plaintiff for the balance of the notice period. Therefore, the employee is under an obligation to account for any earnings and pay any proceeds received from new employment to the employer.
The Partial Summary Judgment Approach: Under this approach, the employee is granted a partial summary judgment and the parties return to court during or at the end of the notice period for further payments subject to the duty to mitigate.
The Hybrid Approach: In the recent case of Lalani v Canadian Standards Association (Lalani), the judge crafted a hybrid approach between the Trust and Accounting Approach and the Partial Summary Judgment approach. The judge ordered that a trust in favour of the employer be impressed upon the damages award paid to the employee during the balance of the notice period, but the employee would be required to account to the employer on a monthly basis with respect to his mitigation efforts and any mitigation income which he earns. This approach relies on the employee’s transparency in accounting to avoid the impracticality of having the parties return to court.
Lessons to be Learned
As Lalani shows, there is no consensus on which approach an Ontario judge will follow when a wrongful dismissal case is decided before the end of the reasonable notice period. It is important to consult with a lawyer before deciding whether to start a wrongful dismissal action, and whether to proceed by way of summary judgment,. The lawyer can also explain the extent of your obligation to mitigate (look for work) throughout the litigation process.
In an employment contract review, a lawyer can explain which rights you are giving up in the contract and suggest changes to benefit you.
Before accepting a severance package, it’s important to get it reviewed by an employment lawyer to ensure you’re not giving up any of your entitlements.
With many terminations throughout 2020 due to Covid-19, employees are asking whether Covid-19 affects their wrongful dismissal rights.