In a recent wrongful dismissal appeal, the Ontario Court of Appeal confirmed that an that an employer alleging failure to mitigate must prove comparable work was genuinely available, not merely that the employee chose not to pursue it. The Court also issued an important corrective ruling on mitigation earnings, clarifying that income earned during the notice period must be deducted from damages regardless of whether the new position is comparable or not.
Background
The employer dismissed the employee and asserted just cause, relying on a customer complaint as the culminating event in what it characterized as a pattern of workplace misconduct. The trial judge rejected the just cause defence and awarded 17 months’ pay in lieu of notice. The trial judge also declined to deduct income the employee had earned in new employment during the notice period, reasoning that the new position was not comparable to his former role.
The employer appealed on three grounds: that the trial judge wrongly rejected just cause; that the employee had failed to mitigate by not seeking comparable sales employment; and that the trial judge had erred in refusing to deduct the employee’s post-dismissal earnings from the damages award.
Decision
The Court of Appeal allowed the appeal in part, upholding the trial judge on just cause and mitigation but intervening on the treatment of mitigation earnings.
The employer accepted that a customer had made a complaint about the employee but was unable to produce admissible evidence from that customer establishing what had actually taken place. Without proof of the alleged triggering event, the culminating incident doctrine could not assist the employer.
The employee acknowledged at trial that he had not sought comparable employment in sales. The employer argued this amounted to a failure to mitigate. The Court disagreed, reaffirming that an employer must establish two distinct elements to succeed on this argument: first, that the employee failed to take reasonable steps to pursue comparable work; and second, that such comparable work was actually available, meaning that had reasonable steps been taken, the employee would likely have found a position. The employer led no evidence that comparable sales roles existed and were obtainable during the notice period. The employee’s personal decision not to re-enter the sales field did not extinguish the employer’s burden on the second element.
Notably, the trial judge had refused to deduct the $32,881.43 the employee earned in his new job during the notice period, citing a passage from the concurring opinion in Brake v. PJ-M2R Restaurant Inc, 2017 ONCA 402, which suggested that earnings from an inferior position need not be deducted. The Court of Appeal rejected this reasoning and held that the concurring opinion in Brake does not state the law in Ontario. The governing rule comes from the majority in that same case: employment income earned during the notice period is generally to be treated as mitigation of loss. There is no exception for earnings derived from a lower-paying or lesser-ranked position. The $32,881.43 was ordered deducted from the damages award.
Despite its partial success, the employer was ordered to pay the employee $15,000 in costs of the appeal, all inclusive. The Court found the employee was “largely successful,” having defended the just cause and mitigation arguments entirely, with the employer’s only win being the arithmetical deduction of earnings the parties had already agreed upon in quantum.
Takeaways for Employers
Proving just cause requires admissible evidence of the alleged incident. The culminating incident doctrine will not rescue a just cause defence if the employer cannot prove the triggering event actually occurred.
The mitigation burden has two parts, and both must be proven. It is not enough to point to a category of work the employee chose not to pursue. Employers alleging failure to mitigate must lead evidence that comparable positions were genuinely available during the notice period and that reasonable efforts would likely have led to the employee obtaining one. Document actual job postings in the relevant field and geography. Without that evidentiary foundation, the argument will fail regardless of the employee’s stated preferences or choices.
All income earned during the notice period must be deducted from damages. Employers should always account for mitigation earnings when calculating exposure. If a dismissed employee takes on new work during the notice period income reduces the damages owed. There is no “inferior position” exception in Ontario law. Track any employment the employee obtains after dismissal, document those earnings, and ensure they are factored into any offer or damages calculation.
At Bridge Legal & HR Solutions we can help you untangle and understand the web of obligations that applies to your employment relationships. To find out how we can help, contact us through our contact form or call us at 647-794-5442.
