Wrongful dismissal damages are normally subject to mitigation, which means that income from a new job after termination is deducted from the damages a terminated employee can recover from their previous employer. For example, if an employee earning $ 60 000 is entitled to six months notice of termination (or $ 30 000 pay in lieu of notice) and earns $ 20 000 during this time then wrongful dismissal damages are $ 10 000. However, in a recent decision, the Court of Appeal stated that there are circumstances where income earned after being terminated will not be deducted. In these cases, an employee can keep all of her wrongful dismissal damages plus the income she earned after being fired.

The Case – 

The employee Esther Brake worked for McDonald’s restaurants for over 25 years.  She spent a significant portion of that time working for one McDonald’s franchise. She was promoted to manager and in the seven years before her termination she consistently received excellent performance reviews.

In 2011, the employer transferred Ms. Brake to an underperforming store.  It then placed her on a performance plan.  The trial judge determined that the employer applied the performance targets to Ms. Brake in an arbitrary manner. The employer then advised Ms. Brake that she could be demoted to a First Assistant position or be fired. In the First Assistant position, Ms. Brake would have been working for much younger employees who she had previously trained.  She found this embarrassing and humiliating and did not accept the demotion.  She never returned to work at McDonald’s.

Ms. Brake attempted to find another managerial role after her termination, but was not successful.  Instead, she took on extra hours as a cashier at Sobeys and found other cashier positions at Tim Horton’s and Home Depot.

The trial judge found that the humiliating demotion was a termination and that Ms. Brake had been wrongfully dismissed. He further found that she was owed 20 months’ compensation for pay in lieu of notice, including statutory severance. Interestingly, the trial judge did not deduct the amounts that Ms. Brake earned at Sobeys, Tim Horton’s or Home Depot from her damages.

The Court of Appeal upheld the trial judge’s decision.

Obligation to Accept Alternate Position

In certain cases, the duty to mitigate could require a wrongfully dismissed employee to accept a new comparable position with her former employer. The Court of Appeal confirmed that an employee is not required to accept every offer of a different position from her employer.  The employee is not obliged to mitigate by working in an atmosphere of hostility, embarrassment, or humiliation. Given that the demotion would have been “insulting to Ms. Brake and her personality and abilities,” she was not required to accept the demotion in order to mitigate her loss.

No Deduction of Post-Termination Earnings

The Court of Appeal maintained that a judge must consider the income earned post-termination, but need not deduct it from the final award. The positions that Ms. Brake held post-termination were “substantially inferior to the managerial position” that she held at McDonald’s. The Court of Appeal agreed with the trial judge that none of her post-termination income should be deducted from the amount owed by McDonald’s. The Court of Appeal found the following:

• First, the Court held that any income earned during the statutory notice period under the Employment Standards Act is not deductible.

• Second, the Court held that where money was earned in another position during the employment, and if those earnings continued after termination, they cannot be deducted.

• Third, the concurring decision of the Court held that if a wrongfully dismissed employee is offered a new job that is not comparable, she is not required to accept it. If she does not accept it, those earnings are not deducted from her damages.  Flowing from this, the Court then held that if the employee does accept a position that is not comparable, the amount is not deducted as mitigation earnings because it is not accepted in mitigation of the damages owed but rather out of desperation or necessity.

Lessons

This decision is very significant for terminated employees. Previous court decisions have repeatedly deducted all income an employee earned after termination as mitigation income.  The Court of Appeal has stated that the legal landscape has changed.  If you were fired and have taken a substantially different job in order to pay the bills, you may still be entitled to damages.  The court may not deduct any amounts from the job you took out of necessity. To find out whether it is worthwhile commencing a wrongful dismissal in these circumstances contact an employment lawyer.

If you would like to speak to a lawyer at MacLeod Law Firm about termination, you can reach us at [email protected] or 647-204-8107.