Mitigation: Part Time Employment: New & Old

The 2017 decision of the Ontario Court of Appeal considered whether certain income earned post termination should be deducted from the damage claim. ¹

The Court was presented with two issues:

1.Should income earned from Sobey’s, with whom the plaintiff had been employed on a part-time basis prior to termination, reduce the claim?

2. Should income earned by Home Depot also earned post-termination reduce the claim, given it was from a considerably inferior position? ²

This Court reviewed the trial judge’s views on this issue and concluded that it was a reasonable inference that the trial judge had held that such income from Home Depot should not impact the claim as it arose from an inferior position. The majority stated: ³:

The trial judge did not directly address the question of whether to deduct employment income received during the notice period from the damages award. It may be, as the respondent contends, that his reasons can be inferred from the last few sentences of para. 24, where the trial judge said:

I find that [Ms. Brake’s] subsequent employment represents a reasonable effort on her part to mitigate her losses. However, I also find that her ability to find employment does not take away from the loss she suffered from being dismissed without cause. The cashier position she occupies now at Home Depot is so substantially inferior to the managerial position she held with the [appellant] that the former does not diminish the loss of the latter.

The Court of Appeal continued to note that, should this be the correct inference, that such a statement would not be good law:

To the extent that the trial judge was suggesting that the court did not need to consider whether income received from a job that was inferior to the one from which the employee was dismissed was mitigation income, I respectfully disagree. That approach does not accord with the principle that employment income earned during the notice period is generally to be treated as mitigation of loss.

This being said, the appellate court continued with its reasoning to determine that such income earned would not offset the claim. ⁴

Within this period, that is, the residual common law period, the plaintiff had received incomes from  Sobey’s and Home Depot $6,793 and $600 respectively.

Prior to termination, the plaintiff had secured part-time employment with Sobey’s from 2002 to 2004. She had testified that her employer was aware and did not object to this.

This raised then the principled issue of whether such income earned from the Sobey’s was deductible in the residual notice claim. This question was answered in the negative. The logic propelling this conclusion is that this income was not a replacement for the income with the defendant employer. The Court found authority for this proposition, which should not be considered novel, in a 1943 Supreme Court of Canada decision:

However, as Rand J. explained in Karas v. Rowlett, 1943 CanLII 53 (SCC), [1944] S.C.R. 1, [1943] S.C.J. No. 46, at p. 8 S.C.R., for income earned by the plaintiff after a breach of contract to be deductible from damages, “the performance in mitigation and that provided or contemplated under the original contract must be mutually exclusive, and the mitigation, in that sense, is a substitute for the other”. Therefore, if an employee has committed herself to full-time employment with one employer, but her employment contract permits for simultaneous employment with another employer, and the first employer terminates her without notice, any income from the second employer that she could have earned while continuing with the first is not deductible from her damages: see S.M. Waddams, The Law of Damages, looseleaf (Rel. Nov. 2016), 2nd ed. (Toronto: Canada Law Book, 1991), at para. 15.780.

Essentially the concept is a simple one. This is income which would have been earned by the plaintiff in any event. It cannot be said to be replacing that which was lost.

One might expect that a trial judge in such a context would consider whether the sum earned in the residual notice period exceeded the prior status quo by virtue of the additional time now at the plaintiff’s disposal.

The appellate court noted that this issue was not argued at trial and further that the evidence in any event did not reflect this possibility. The Court noted that such an argument did remain a live one for a future day:

I leave for another day the question as to when supplementary employment income rises to a level that it (or a portion of it) should be considered as a substitute for the amounts that would have been earned under the original contract and, accordingly, be treated as deductible mitigation income.

This issue was reviewed by the B.C. Court of Appeal in its 2018 decision. ⁵ The essential question is whether the post-termination income could have been earned, regardless of termination:

  In my opinion, the principle as stated by the trial judge is too categorical. It is not all income from the second job that is excluded from the damage calculation, but rather income from the second job that could have been earned had the employment from the first job continued. In other words, the question is whether the new income is replacement income regardless of the source of the income or a continuation of supplementary income being earned prior to the dismissal. I do not see the judgment in Redd’s Roadhouse as inconsistent with this principle.

In this case the question was hence how much, if any, of the post-termination income could have been earned in any event and what sum would be considered replacement income.

As to the Home Depot income of $600, the Ontario Court of Appeal stated that the evidence concerning this was unclear and given its small sum, was not to be offset.

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1. Apart from the issue of income earned in the notice period, the Court of Appeal also confirmed that EI benefits do not reduce the claim and further that income earned within the statutory period would also not offset the claim. Both these issues were settled law prior to this decision.
2. Both these arguments related to income earned beyond the statutory period and within the residual common law period
3. Feldman J.A. delivered concurring reasons dealing with the Home Depot post termination income
4. The other arguments presented by the employer on appeal seeking a reduction of EI benefits and income earned in the statutory notice period were dismissed. The remaining reasons considered income earned in the residual period of notice, that is. the common law period of notice which exceeded the statutory period. The notice period had been set at 20 months.
5. Pakozdi v B&B