On May 23, 2017, the Ontario Court of Appeal upheld the decision
of the Superior Court of Justice in the case of Brake v. PJ-M2R
Restaurant Inc. 2016 ONSC 1795, 2017 ONCA 402, endorsing the lower court's
finding that certain earnings during the notice period should not
be deducted from damages for pay in lieu of notice. Those earnings,
found to be from a "much inferior position" to that from
which the employee was wrongfully dismissed, were held
not to be amounts earned in mitigation of
damages.
The facts in the case as found by the trial judge, briefly, were
as follows.
Esther Brake worked for McDonald's restaurants for more than
25 years, and approximately 20 of those years were worked for the
Defendant (or explicitly recognized in the employment contract).
The Defendant, ("PJ-M2R") was a holding company with
several McDonald's restaurants in Ottawa. In 2004, Ms. Brake
was promoted to the position of store manager and she maintained a
management role until her dismissal, at which time she was 62 years
old.
Although Ms. Brake had a history of "excellent"
performance reviews, in November of 2011 she received her first
negative review. She was shocked with the negative review. Prior to
this review, Ms. Brake was managing PJ-M2R's Kanata McDonalds
and also a nearby McDonalds within a Wal-Mart, but after the
November 2011 review, she was transferred exclusively to the
Wal-Mart location which transfer was put forward as an opportunity
to improve her performance. However, the Walmart location was
smaller with lower sales and fewer employees and was more difficult
to manage as it had been trending badly, ranking 1,410 out of 1,437
restaurants in Canada. Despite working excessive hours, she was
unable to "turn around" the Wal-mart location. In August
of 2012, Ms. Brake was therefore informed that she had failed the
Goals Achievement Process program and that she had to "take a
demotion or go." The Defendant offered her the position of
first assistant, which had a similar salary but substantially
inferior benefits and would mean that Ms. Brake would be reporting
to younger, less experienced employees, some of whom she had
trained and supervised. The Court held that this would have been
embarrassing or even humiliating for Ms. Brake. As Ms. Brake
refused to accept the demotion, she was ultimately dismissed for
cause.
Ms. Brake brought an action for wrongful dismissal, claiming
damages for common law notice plus her statutory entitlements. At
trial, the court found that the Defendant had not been entitled to
dismiss her for cause. The Court held that she had not been given
any clear and reasonable opportunity to correct the alleged issues
with her performance but instead was transferred to a
"flailing branch" and expected to "turn it
around," which was arbitrary and unfair. The decision by Ms.
Brake to consider herself constructively dismissed by the Defendant
notwithstanding the offer of continued lesser employment was held
to be reasonable. The Court set the reasonable notice period at 20
months and awarded damages for compensation in lieu of notice of
$104,499.33.
The Court further held that, "despite her reasonable best
efforts," she was unable to secure a reasonably comparable
management position during the notice period. During the
notice period, she had increased her hours at Sobey's as a
cashier (a position that she had long held, which was known to the
Defendant), had worked part time at Tim Horton's, and had
attempted to start a babysitting and cleaning service. She applied
for many positions and eventually accepted a cashier position at
Home Depot. The Superior Court held that "her ability to find
employment does not take away from the loss she suffered from being
dismissed without cause. The cashier position she now occupies at
Home Depot is so substantially inferior to the managerial position
she held with the Defendant that the former does not diminish the
loss of the latter." Therefore, monies earned from these
"substantially inferior" positions during the notice
period were not deducted from the damages for compensation in lieu
of notice of $104,499.33.
The Court of Appeal upheld the lower court. Its logic in doing so
was that the duty to mitigate requires that a wrongfully dismissed
employee use reasonable efforts to find a position reasonably
comparable in salary and responsibility to the one from which she
was wrongfully dismissed. Earnings from such a position, if
secured, would be deducted from damages as mitigation. If the
employee were to turn down such a position, or fail to use
reasonable efforts to find one, then amounts that could have been
earned are deducted from damages as mitigation, based on a failure
to meet the duty to mitigate. However, where the employee can only
find a position that is not comparable and turns it down, amounts
that could have been earned from the position are
not deducted since the employee is not
required to accept the position in order to meet the duty to
mitigate. Therefore, if the employee does accept the non-comparable
position, the earnings should not be deducted.
The prevailing view has to this point been that any monies earned
during the notice period would reduce the employer's liability
to the employee. However, it appears that going forward, employers
should now consider that if comparable employment is not available
for the wrongfully dismissed employee, the employer may be on the
hook for all pay in lieu of notice even if the employee is able to
earn money in order to "survive" while awaiting judgment.
The idea that any and all amounts earned during the notice period
would be deducted from any ultimate judgment previously may have
been a disincentive to employees to continue to pursue a better
severance package or longer notice period, as the delays of
litigation without any income are more than most employees can bear
financially. Although facts similar to the Brake case will
likely arise infrequently, this Ontario decision, if embraced by
the courts in other provinces, could potentially have the effect of
employees being less likely to settle quickly in wrongful dismissal
cases where they are concerned about financial stability while
awaiting a decision from the courts.
To date, leave to appeal this decision to the Supreme Court of
Canada has not been filed.
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