Reasonable Notice Period Reduced Because Employee Failed to Take Reasonable Steps to Mitigate their Damages

Employees have a legal duty to take reasonable steps to pursue alternative comparable employment and if available, to accept such employment. Damages will be reduced or denied by a court where an employer is able to prove that an employee failed to mitigate their loss. In Michaels v. Red Deer College, [1975] S.C.J. No. 81 (SCC), the Supreme Court of Canada stated:

[t]he primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a “duty” to mitigate should be understood in this sense.[1]

A recent decision from the Ontario Superior Court of Justice, Lake v. La Presse (2018) Inc., 2021 ONSC 3506, serves as an example of where a former employee’s reasonable notice period was reduced from eight months to six months to account for their failure to take reasonable steps to mitigate their damages. The decision involved the without cause termination of a general manager with five-and-a-half years of service (the “Employee”) from their employment with a daily online French language newspaper, based in Montreal, Quebec (the “Employer”). On a motion for summary judgment, the following issues were raised:

  1. What is the reasonable notice period?

The court determined that the reasonable notice period in this case was eight months. The parties agreed that the Employee was terminated without cause and that she was entitled to reasonable notice at common law. At the time of the Employee’s termination, she was earning a base salary of $185,000 per year, and enjoyed other benefits including a car allowance and a bonus. While the Employee held a position of some responsibility with the Employer she was not a key member of the management team. Additionally, she was neither a short nor long service employee. At the time of her dismissal she was 52 years old, an age which the court accepted may be harder to find work. However, the court did set out that she had significant experience in management and sales to offer a prospective employer, especially in the media industry.

2. Is the Employee entitled to compensation for loss of her bonus over the reasonable notice period?

The court determined that the Employee was entitled to damages in respect of the lost bonus, both for the period of January 1, 2019 to March 26, 2019 (the period of time that the Employee worked in 2019 before being advised that their employment would end on May 30, 2019), and for the reasonable notice period. The Employee’s damages for lost bonus were calculated by taking an average of the past three years (as opposed to averaging her bonus over a six year period).

To assess whether the Employee was entitled to compensation for loss of her bonus over the reasonable notice period, the court referred to the two-stage analysis endorsed by the Court of Appeal for Ontario in Paquette v. Tera-Go Networks Inc., 2016 ONCA 618: (i) first, the court must consider whether the bonus was an integral part of the employee’s compensation package; (ii) if so, the court must ask if there is any language that would specifically remove the employee’s bonus entitlement.

Here, the bonus was deemed substantial, and was found to form a significant part of the Employee’s overall compensation. The court disagreed with the Employer’s argument that the Employee had no entitlement to damages related to the bonus because the bonus was discretionary, and based on attainment of corporate objectives.

3. Did the Employee take reasonable steps to mitigate their damages?

Upon reviewing the Employee’s mitigation efforts, the court determined that a two-month reduction in the period of reasonable notice was appropriate. The court was not satisfied on the evidence that there were no or few positions for which the Employee was qualified. Additionally, the court had concerns that the Employee aimed her job search too high. Had the Employee broadened her expectations to also include positions at the levels she had previously held, the Employee would have been able to apply for additional jobs. The court decided that the Employee’s evidence regarding a lack of opportunities in the job market reflected opportunities that would have been, in effect, a promotion for her.

The steps taken by the Employee to mitigate her damages were found to not be reasonable in the following ways:

  • the Employee waited too long before beginning her job search. The court found it was reasonable to expect her to have begun her search a month after termination, however, the Employee delayed for an additional month before seriously looking;
  • the Employee aimed too high as she chose to unreasonably limit her job search, which had a corresponding impact on her ability to find work. While there was nothing wrong with her applying for vice president roles, the court found that she should have been applying for less senior roles as well, as general manager, and eventually as a sales representative if her status as unemployed continued;
  • the Employee waited too long before applying for any jobs, and applied to very few jobs. In the year following her termination, the Employee applied for eleven jobs, nine of which were vice president roles, a more senior title than the one she had ever held.

If you have any questions, please do not hesitate to contact one of the members of our Labour & Employment Group.

[1]Michaels v. Red Deer College, [1975] S.C.J. No. 81 (SCC), at para. 8. [emphasis added.]

Employment Law

Authors

Subscribe

Stay Connected

Get the latest posts from this blog

[form_control_error]
Please enter a valid email address