Court of Appeal Focuses on Employee’s Attempts to Mitigate Termination

Written on behalf of Peter McSherry

When an employee is terminated without cause, and no notice is given, the employee will usually be entitled to payment in lieu of notice. The common-law rules concerning payment in lieu of notice require that courts, or employers in pre-litigation matters, consider a number of factors, including an employee’s age, length of service, level of responsibility, and more. For example, an employee who holds a senior title and has been employed by the same employer for three decades would be entitled to a more extended notice period than an employee who has been working at an entry-level position for a year. 

On the other hand, employees are responsible for mitigating their losses by seeking new employment. However, what degree of mitigation is required before damages that would otherwise be granted are revoked? A recent decision from the Court of Appeal for Ontario provides guidance on this question.

Manager at newspaper is terminated

In Lake v. La Presse, the plaintiff employee, worked for a French-language newspaper based in Montreal. She worked as the general manager of the company’s Toronto office. She was the most senior employee of the Toronto office, reporting to the company’s Vice President of Sales and Operations. Her base salary was $185,000 and as part of her compensation, she received a car allowance, annual bonus, and pension. 

At the time of termination, the plaintiff was 52 years old. The termination was without cause and resulted from the employer’s decision to close their Toronto office. The plaintiff was given notice of her termination on March 25, 2019, and her last day of work was April 30, 2019. The hearing took place approximately two years after the plaintiff was terminated, and she was still without work at that time. 

Motion judge reduces damages as result of failure to mitigate

At the hearing, the issue was not regarding whether or not the employee was terminated without cause, but instead, the main issue was determining the appropriate length and quantum of notice. 

In considering the employee’s seniority, the motion judge found that she held some responsibility, however, she was not a key member of the management team. Upon consideration of the duration of her employment, age and experience, the motion judge determined that the employee was entitled to eight months’ notice. However, the Court also found that the employee was responsible for mitigating her loss. Therefore it was her responsibility to attempt to find similar employment.

The judge applied a two-part test which asked first whether the employee took reasonable steps to mitigate her loss and second, whether she would have likely found comparable employment if she had taken steps to mitigate. The Court determined that the employee did not take reasonable steps to mitigate as she waited too long to begin her job search, she aimed too high in applying for vice-president roles, and she waited too long before actually applying for jobs. 

Ultimately, the notice period finding was reduced by two months, resulting in the employee being entitled to six months’ notice. 

Employee says motion judge did not properly apply test

The employee appealed the motion judge’s decision, stating that the judge erred in finding that she had not taken reasonable steps to mitigate her damages. The employee submitted that the judge misapprehended the evidence related to her job search, erred in suggesting she should have applied to less-senior positions and that she aimed too high in seeking the role title of vice president.

The Court of Appeal began by focusing on the first branch of the test that the motion judge applied. The Court agreed with the motion judge that the employee waited too long to start her job search but nevertheless, found fault in the lower Court’s assessment of the jobs that the employee applied to. The Court emphasized that the employee’s responsibility to mitigate includes seeking “comparable employment,” which the Court was satisfied she had done, stating “there was no obligation for (the employee) to seek out less remunerative work, including by working as a sales representative.” The Court commented on the fact that applying for sales jobs would have left her overqualified and subject to sizable pay cuts if she was successful in landing one of those jobs. 

Motion judge erred in not answering the appropriate question at the second stage of the test

When analyzing the second stage of the test, the Court found the motion judge erred in assuming that more “junior” level jobs were available when there was no evidence to support this. The motion judge had erred in not asking or answering the key issue, which was whether the respondent had established that, had reasonable steps to mitigate been taken by the appellant, she would have found a comparable position during the reasonable notice period. 

The Court of Appeal held that the employee was entitled to eight months’ notice. 

Contact the offices of Peter A. McSherry for help on severance-related issues

Peter A. McSherry Employment Lawyer supports clients through matters related to  termination, wrongful dismissal and severance issues. Our firm assists employees and provides guidance during what can be a difficult time. We can help employers understand their legal obligations and provide advice on managing the legal and reputational risk that occurs when making decisions regarding termination. Contact us online or by phone at 519-821-5465 to schedule a consultation today.