Mitigating Damages after Dismissal

Employees are required to make best efforts to reduce their damages after dismissal, usually by attempting to secure comparable employment elsewhere. These mitigation efforts are taken into consideration by courts when awarding damages to dismissed employees for wrongful or constructive dismissal. If an employee earns new income after his/her dismissal, this income is usually deducted from any damages award against the former employer. If an employee does not take reasonable steps to mitigate their damages, a court may reduce the amount of damages that would have otherwise been owed to the employee. In Brake v. PJ-M2R Restaurant Inc.,¹ the Ontario Court of Appeal held that earnings during the statutory notice and severance period are not deductible as mitigation income from the damages award payable by an employer. The Court held that only employment income earned during the common law notice period may be deducted as mitigation income.

Background

Esther Brake had worked at various McDonald's restaurants for more than 25 years. In August 2012, Ms. Brake was told she must accept a demotion from her role as manager or she would be fired. When Ms. Brake refused to take the new position she was terminated and sued her employer for wrongful dismissal. The trial judge found that Ms. Brake had been wrongfully dismissed and that an appropriate notice period was 20 months, inclusive of statutory notice and severance, as required by the Employment Standards Act. The employer appealed.

The Court of Appeal's Decision

The Ontario Court of Appeal dismissed the employer's appeal and affirmed the 20-month dismissal award to Ms. Brake. In affirming the lower court's decision, the Court of Appeal addressed Ms. Brake's efforts to mitigate her losses after termination. The appellant employer had submitted that the trial judge erred by not reducing the damages award by the income that Ms. Brake earned during the notice period. The Court of Appeal held that the damages award of 20 months was a global award, encompassing both statutory entitlements and common law damages. The Court held that Ms. Brake's statutory entitlements were owed to her regardless of whether her termination was wrongful, and therefore could not be considered as damages for wrongful dismissal. Therefore, the income that Ms. Brake earned during her statutory entitlement period could not be subject to deduction as "mitigation income." The Court held that, as a general principle, income earned during the common law notice period may be deducted as mitigation income.

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¹ 2017 ONCA 402. Available at https://www.canlii.org/en/on/onca/doc/2017/2017onca402/2017onca402.html?autocompleteStr=Brake%20v.%20PJ-M2R%20Restaurants%20Inc.%202017%20ONCA%20402&autocompletePos=1.