The General View

The accepted general rule for wrongful dismissal damages is that the employee must take reasonable steps to seek alternate income and, further, that such new income earned should reduce the liability of the employer, to the extent that this sum has been earned in the notice period.

The Exceptions

This rule has been the subject of one Court of Appeal[1] case which refined this concept. This case concluded that certain “incomes” should not be deducted. These included:

1. Employment Insurance benefits;
2. Any income earned in the statutory notice and severance period; and
3. Any income which could have been earned as part time earnings had the plaintiff remained employed in any event.

None of the above exceptions were startling revelations.

The Dinger

There was, however, one further income sum which was relevant to the case. The plaintiff had earned $600 from Home Depot in the notice period, and beyond the statutory period. Prior to this decision, one would have expected that these earnings would offset the claim.

The majority decision[2] simply stated that the evidence surrounding this sum was unclear and declined to deduct this amount from the award. This being said, the trial judge had stated that the Home Depot job was so inferior from the plaintiff’s last position of restaurant manager, he would not deduct these earnings. This specific concept was not discussed by the majority. The concurring reasons, however, adopted this view of the trial judge.

This is not a statement of law as a binding appellate decision as the majority did not come to the same view.

Concurring Reasons Becoming Law?

This being said, a recent decision[3] applied the same position of the concurring reasons. The facts showed a 65 year old plaintiff, terminated from his position of General Manager awarded 9 months’ notice. He earned initially $2,000 a month and then $1,500 a month in a more inferior position. These earnings totaled approximately 37% of the plaintiff’s prior income.

The trial judge found that this position was one which was not required as a mitigation obligation and thus was not deducted from the award. The court relied upon the above concurring reasons as a statement of law, without noting that it was not the majority decision.

Whether or not this is a correct statement of law remains to be determined. Should this be so, the subordinate question is what principles should be applied to determine whether or not this income should reduce the claim?

Offers to Settle

This issue leads to further complications as generally the employer will be inspired to make a formal offer to settle the claim which requires an underpinning of what the fair sum will be. The uncertainty leads to unnecessary complications.

Contemplating the Case

Employers will need concrete advice to understand the likely claim and the issues in question. The issue is unnecessarily complicated.

Employees will need advice when considering whether to accept such an “inferior” position and its ramifications and similarly, how to consider the employer’s offer and indeed, what offer he or she should make in advance of trial.

Both sides must understand the consequences of advancing and receiving settlement offers, given this issue, and the resulting costs issues. The law requires certainty and clarity. Presently it is a dice game.

Get Advice Before You Act

Contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.

[1] Brake v PJ-M2R

[2] The decision was unanimous, however, there were concurring reasons written by Feldman J.A.

[3] Mackenzie v 1785863 It may be noted that the defendant did not have legal counsel to defend the claim.