This issue is more complex than one might expect. The issues have become:
- Is there a fundamental obligation of the employer to pay for reasonable mitigation expenses?
- Are the expenses limited to those incurred in the notice period?
- Should this claim be limited to the situation where the employee has succeeded in finding new income and hence then offset the mitigated income deduction?
- If so, is there a cap on the amount of allowable expenses to the extent of new income earned?
- Are moving expenses allowed, given success in finding a new position?
- Should such expenses include real estate transaction costs? If so, is a profit realized on the sale influential?
- Are moving expenses recoverable based on a direct or implied term when the employee has been relocated at the direction of the employer?
- Are expenses incurred to open a new business recoverable?
- What is the impact, if any, of bad faith conduct of the employer?
Basic Premise
It is clear that a dismissed employee may claim reasonable costs of mitigating his loss, at least in most common law provinces, apart from British Columbia.
As stated in the decision of the Nova Scotia Court of Appeal in February of 2010 in Boutcher v Clearwater Seafoods:
[80] A wrongfully dismissed employee may recover reasonable expenses of mitigation. England, Wood Christie, Employment Law In Canada ¶ 16.79 says:
. . . First, and most widely endorsed, is the well-established principle that a plaintiff can offset reasonable costs incurred in mitigating his or her losses. The rationale is that since the employer obtains a benefit from the duty of mitigation in that earnings obtained during the notice period are deducted from the employee's damages, it is only fair that the employer should finance the employee's costs in finding such a job.
Success Required?
The quoted passage suggests that the expenses are relevant only when positive income is received from mitigation. It is respectfully submitted that this is not the law. The expenses are recoverable independent of success being achieved in all common law provinces, save British Columbia.
The Alberta Court of Appeal had spoken to this issue earlier in Christianson v North Hill News in September of 1993:
The next question is expenses of mitigation, and this stands independently. When an employee is fired without notice, if nothing is done he or she will suffer damages by loss of salary. Any effort to find a replacement job are likely to cost something in postage, telephone calls, shoe leather, purchase of newspapers, revising a resume, and retraining. Therefore, prima facie there must be some damages. A plaintiff who tries to mitigate will act reasonably unless it is clear that there is no chance of another job. Therefore, the amount of damages cannot be zero. It is a choice between lost salary (if mitigation was hopeless or tried but failed), and costs of mitigation (if mitigation succeeded or would have). That is so whether the plaintiff tries to mitigate or not. She cannot be in a worse damages position by failing to mitigate than she would have been by mitigating successfully. See Laframboise v. Billett (1992) 5 Alta. L.R. (2d) 394, 398 (para. 11) (C.A.).
Limited to Notice Period?
One would expect that the mitigation expenses are to be recoverable only to the extent that such sums are incurred within the notice period. Presumably the theory of the claim is that it is as a consequence of the plea of the need to mitigate and hence beyond this period, there should be no logical claim.
The Alberta Court of Appeal in Christianson, cited above, stated otherwise:
It is objected that most of that sum was expended outside what is argued to be the proper notice period. Even assuming that that is still true after the increase in notice period, we cannot see the relevance of that point. Everyone agrees that the duty is to mitigate promptly. We award that sum.
Admin Expenses
The plaintiff claimed and recovered mitigation expenses in the form of out of pocket secretarial and administrative expenses in the sum of $6,600 in Lerch v Cableshare, a decision of the Ontario Superior Court by Hockin, J. in December of 1996. The theory advanced was that, had the plaintiff received working notice, he could have worked at the premises of the defendant with the benefit of its secretarial staff, telephones and similar facilities.
To the same impact is a decision of the Ontario Court of Appeal in Gyrba v Moneta Porcupine. This was not an issue on appeal but the decision reflects the present sentiment of the view of such expenses, on this occasion relating to post-termination travel costs relating to a job search of $12,654.
Educational Programs
Claims for expenses incurred to upgrade job qualifications to facilitate new employment opportunities have succeeded. However, there must be a direct nexus to show that employability will be advanced, as found by Lofchik, J. in Hatch-Stewart v St. Catharines Museum, a decision of the Ontario Superior Court in November of 2007.
A similar claim for an upgrading course at the Institute for Technology was allowed by the Alberta Court of Appeal in Christianson v North Hill News. The issue raised in defence was whether such expense would have been incurred in any event, had working notice been given, a factual determination which the court considered and rejected. The claim of $694 was allowed.
The trial judge in Roberts v St. Joseph in June of 2011, a decision of Gordon, J. of the Ontario Superior Court, allowed the plaintiff recovery of courses in which he enrolled for a certificate in project management accepting his evidence that many of the positions to which he applied required this certification as a job requirement. The sum allowed was $1,311.
The Court in Baker v United Grain Growers, a 1978 decision of the Alberta Queen’s Bench, allowed the sum spent on real estate licence courses of $336.
Moving Expenses Allowed
The Ontario Superior Court considered such claims in the case of Dennis v Barr, a decision which was made by Del Frate, J. in August of 2010.
The plaintiff was employed by the defendant in Sundridge Ontario for 21 years, most recently in the position of editor of the newspaper. He was terminated after the paper was sold to Metroland and told he was to be paid the then statutory sum of 8 weeks’ pay.
The plaintiff was successful in finding employment in Milton. He relocated to southern Ontario while his family temporarily remained in the north. He rented temporary accommodation in Milton after which he bought a residence in Waterdown.
He claimed mileage expenses in travelling to and from Sundridge for 5 months, a claim which was allowed in the sum of $4,508. The plaintiff’s spouse had remained employed in Sundridge for this time period.
The claim for rental accommodation for the period from July 2007 to November 2007 when he and his family moved to a townhouse was also allowed for the sum of $2,060.
The claim for further rental for the period from November 2007 to October 2008 was denied.
The plaintiff claimed successfully the costs of moving from Sundridge to Burlington in the sum of $1,699 and unsuccessfully for the costs of the later move from Burlington to Waterdown in November of 2008.
Storage fees were also allowed for the period from May to October 2008 for $500, plus $424 for a truck rental to move items from storage to Waterdown.
The New Brunswick Queen’s Bench in LeBlanc v Eurodata , a decision released in November of 2007, allowed mitigation expenses to move to Atlanta Georgia, given successful mitigation in the notice period. There was no reference to the “cap” concept although the allowed costs came very close in total to the mitigated income. The allowed expenses included a visa fee, legal fees for immigration to the United States, placement fees, moving expenses, all which totaled $8,952.00 and which reduced the mitigated income to a net sum of $498.
Significantly and curiously, these expenses were allowed even though the new employer had paid for them. The court concluding that such sums were, in effect, charged back to the employee as such sums adversely affected his new salary.
Expenses Denied - No Causal Connection
The trial judge in McKinnon v Lewis Energy Management also allowed the plaintiff the costs of the sale of his residence in Caledon and moving to rented premises following his termination in November of 1993.
The Court of Appeal reversed this award which at trial had been set at $22,668.
These expenses were unrelated to the plaintiff’s move to New Jersey in February of 1994 when he began new employment. The trial judge had found that the sale of the residence was inevitable, in any event, even though planned prior to the new employment opportunity as the new employment would have dictated such events.
The Court of Appeal, in March of 1999, disagreed as it saw no causal connection. It is to be noted that the notice period was set at 4 months and the date of termination was August 4, 1993 and the move taking place 6 months later.
Moving Expenses Allowed but Not Real Estate Costs
In Geluch v Rosedale Golf & Country Club, a decision of Himel J. of the Ontario Superior Court, the plaintiff was successful in finding employment in Vancouver 13 months following his termination. The notice period was set at 15 months. The plaintiff claimed his expenses incurred in moving to Vancouver including the costs of the sale of his residence in Toronto on which he had made a capital gain of $27,500.
The relocation expenses were allowed as recoverable but the expenses related to the sale of his residence were not.
[204] In reviewing the expenses claimed, I agree that those expenses related to the sale of his Toronto house should be offset against any capital gains he made in that regard. As those expenses are not consequential upon Mr. Geluch’s dismissal and would have been incurred after the reasonable period of notice in any event, they are not recoverable. The remaining expenses such as airfare to British Columbia, costs for transporting the car, the licence fee, moving, and telephone connection are related to his dismissal from Rosedale, are reasonable and should be recoverable. I fix mitigation expenses at $8,000.
Agreement Express or Implied on Move to Alternate Location
Occasionally moving expenses, absent those incurred to mitigate successfully, will be awarded based on an agreement express or implied that the employer will bear this responsibility. Fact situations where the company has moved the employee from “home base” to a remote or foreign location may be argued to have an implied term that the costs of relocating back home will be borne by the employer.
Such was the case in Munana v MacMillan Bloedel in which the plaintiff was assigned the position of special consultant to European Development in Spain. The court agreed that it was an implied term that the company pay the costs of the anticipated return to British Columbia. This case is unreported but was referred to, but not applied on the facts, in Lewarton v Walters, 1985 British Columbia Supreme Court decision.
The Ontario Supreme Court came to the same conclusion in Johnston v Northwood Pulp. The employee had been transferred from Ontario to Vancouver. The employer had expressly agreed to pay the moving expenses upon completing the assignment and returning then to Ontario.
Vos v Security Trust (1969) 68 WWR 310 a decision of the Alberta Queen’s Bench of Riley. J. awarded the plaintiff moving costs of $2,500 when he moved back to Calgary to take new employment. The plaintiff, assistant general manager of the defendant’s mortgage department had been moved at the defendant’s request from Calgary to Red Deer in February of 1967. He was terminated in 1968.
Expenses Foreseeable and Bad Faith Conduct
The Prince Edward Island Supreme Court considered this issue in the April 2000 decision of Justice Webber in Barnard v Testori Americas.
The plaintiff was employed by the defendant as Design and Engineering Manager from September of 1996 to May 12, 1997. The plaintiff was not seeking employment as he was then secured employed in England when he received telephone calls from the defendant’s search firm which resulted in a meeting between the plaintiff, his wife and the representative of the employer, Mr. Lapegna at Heathrow Airport.
The plaintiff accepted the offer of employment, moved to Summerside with his family at the end of the summer and began employment in September 1996. The company paid the costs of the airfares and in addition provided return tickets which were valid for up to six months.
The first six months were agreed as a probationary period and for that reason, the plaintiff chose not to purchase a home in this time period. After the 6 months expired, the plaintiff bought a new van on February 25, 1997, signed an agreement of purchase and sale for a house to be built on March 3, 1997 at $133,900 and on April 14, 1997 entered into a loan agreement with his spouse to finance a building contract.
The trial judge found that the company had come to the conclusion in January of 1997 that the plaintiff was not capable of performing the responsibilities of the position. This was a significant finding as by that date the plaintiff could have moved back to England at minimal personal expense as he had yet to purchase a home or a car. Even with the knowledge of the plaintiff’s intent to make major financial investments, no notice was given to him by the defendant of his precarious position. It was found that the company took such actions as it needed the plaintiff to close a major contract and obtain Department of Transportation inspection and approval of it. As this contract neared completion, the plaintiff’s job was offered to someone else without notice to the plaintiff and a few days later he was terminated, allegedly for cause on May 12, 1997.
On termination, the plaintiff decided that his best option was to return to England where he still owned a home. His work visa in Canada was particular to the defendant. He returned to England on August 27, 1997 and obtained employment in 2 weeks.
The plaintiff had signed an employment contract which limited his termination claim to 8 weeks. The trial judge extended this to 4 months in view of his finding of a Wallace breach.
The plaintiff also claimed as special damages (1) the expenses relating to the sale of his personal and real property, (2) the loss of his use of a time share in Florida which he had paid in advance and (3) the costs of relocating his family of five back to England.
On June 5, 1997 the company paid the contracted sum of 8 weeks’ severance. Between May 12 and August 26, the plaintiff completed the construction of his residence and tried to sell it, unsuccessfully. Ultimately the home was sold by the Bank and a loss was incurred in the sum of $16,652, that is, loss against the sum due under the mortgage.
The court found that the expense claims as asserted were reasonably foreseeable. The court took issue with the failure of the company to advise the plaintiff that his position was in jeopardy during or near the end of the 6 month probationary period. The sole claim denied was the Florida time share.
The expenses were awarded as (1) personal loan of $17,000 (2) deficiency on the sale to the Bank of $16,652 (3) moving costs of $10,526 (4) shipping costs of $288 (5) airfares of $2,595 and (6) legals of $1,612.
The judge also linked the special damages to the “bad faith dealings” of the defendant.
Alberta
The decision of Vos v Security Trust, supra, was criticized with disfavor in In Ibrahim v. Association of Professional Engineers, Geologists and Geophysicists of Alberta, a decision of the Alberta Queen’s Bench in November of 1985.
The plaintiff claimed the sums of $13,975 for job search expenses, $20,000 for relocation expenses and $4,000 for relocation counseling. The court addressed the general concept of the claim for mitigation expenses and concluded that, absent success in mitigation to reduce the claim, there is no basis for the recovery of such sums.
McFadeyn, J. stated as follows:
The plaintiff submits that because an employee is required by law to mitigate damages, any reasonable expenditure made in an effort to mitigate is recoverable from the party which breached the agreement even though efforts at mitigation were not successful and produced no income within the notice period. On this theory, the employee can recover damages far in excess of the amount which he would have received had the contract been performed by the giving of reasonable notice. This appears to me to contradict the basic premise on which damages for breach of contract are awarded; that being to place the innocent party in the same position as it would have been had the breach not occurred.
The court determined that the Vos v Security decision was overruled in Alberta. The case referenced below of Busch did not deal with a claim for mitigation expenses. It is meaningful for the general concept but it was not dealing with submissions on that issue and it cannot be said to be authority for the proposition for which it is advanced. The court in Ibrahim continued:
In Busch v. GTE Sylvania Can. Ltd. 1982 ABCA 177 (CanLII), (1982), 40 A.R. 189, Stevenson J.A. giving the judgment of the Alberta Court of Appeal stated as follows at p. 190:
We reiterate what we said in argument, in response to the appellant’s general submissions, that in wrongful dismissal cases the measure of damages is the loss of income (including benefits) that the employee would have received had the employer carried out the contract and given nine months’ notice. If the employee does not continue to work for the notice period then from the nine months salary must be deducted income earned from other sources … It is clear from all of the other authorities that these earnings must be deducted in accordance with the principle of mitigation and in order to avoid over compensation.
We certainly cannot introduce the principles described in English cases based on English statutes which clearly abrogate the common law. This subject is, in Alberta, still governed by common law and by that we mean the common law of contract.
[101] In the matter before me, the plaintiff seeks not only the full salary and benefits for the notice period but also amounts which he claims to have expended in an effort to find new employment and amounts which he will expend in relocating his family to the site of his new employment.
[102] Had the defendant given the plaintiff one year’s notice of termination or had the defendant paid the salary in lieu of notice, there would have been no breach of contract by the defendant. While the plaintiff would have incurred the same expenses in seeking new employment and in relocating, he could not have looked to the defendant for reimbursement of these expenses.
[103] The plaintiff submits that because an employee is required by law to mitigate damages, any reasonable expenditure made in an effort to mitigate is recoverable from the party which breached the agreement even though efforts at mitigation were not successful and produced no income within the notice period. On this theory, the employee can recover damages far in excess of the amount which he would have received had the contract been performed by the giving of reasonable notice. This appears to me to contradict the basic premise on which damages for breach of contract are awarded; that being to place the innocent party in the same position as it would have been had the breach not occurred.
[104] Where the employee has succeeded in mitigating damages by finding new employment, amounts earned by him will be deducted from the salary which he should have received during the notice period. It is logical that any expenses incurred by him in so mitigating his damages should be deducted from the salary earned in the new position. The net effect in these circumstances would be to place the dismissed employee in the same position as he would have been had he been given reasonable notice of the termination of his employment.
[105] In cases where the employee proves that an expenditure made in an effort to mitigate damages is the direct consequence of the failure of the employer to give notice (the breach) then he would be entitled to recover that amount. In this respect there is an onus on the plaintiff to prove more than that he incurred certain expenses because he was dismissed from his employment. He must establish that had he been given proper notice of the dismissal he would not have incurred the expenditure. I emphasize the fact that the breach of contract is not the act of dismissal of the employee. It is the failure to give reasonable notice of the intended dismissal that constitutes the breach of the agreement. Damages claimed must arise as a result of the failure on the part of the employer to give reasonable notice and not from the dismissal. The employer has the right to dismiss the employee subject only to giving reasonable notice.
This analysis considered and rejected the proposition that it was the default of the employer which required the plaintiff to incur such expenses. The court continued to state however, that where success came from the mitigation expenses, these sums should be set off against the income received to “net” the mitigation deduction.
The court also noted that if the plaintiff testified that had he been given proper working notice, he would not have incurred such expense, then in this circumstance the mitigation expenses would be recoverable.
The decision misses the point that it is failure of the employer to give notice that creates the mitigation obligation and hence the expenses incurred should rationally follow. It is the employer's plea of failure to mitigate which leads to the logic of the claim.
On the facts before the court, it was not determined that the mitigation expenses were incurred only because of the failure to give notice and were denied. Even if they were to be allowed, they would be limited to those incurred in the notice period. The same reasoning applied to the relocation counseling fee. It did not assist this claim that there was no invoice as of trial and the services were provided voluntarily. The moving expenses had not been incurred as of the date of trial. All such claims were dismissed.
This decision however leaves open the implied or direct contract to move the employee ‘back home” where such facts may allow. That would have appeared to be the incentive in Vos as the company had moved the plaintiff from Calgary to Red Deer one year prior to his termination, although in fairness, the decision is not expressly reasoned on these grounds.
As noted above, the Alberta Court of Appeal took a contrary position in Christianson v North Hill News in September of 1993, although it did not speak to Ibrahim directly by name, it clearly rejected its ratio.
It would accordingly appear that the law in Alberta is the same as the remaining common law provinces.
Tort Claim
The tort analysis is not as restrictive and when, as in the case of Queen v Cognos, a claim may be found in negligent misrepresentation, the ambit of that which is reasonably foreseeable as damages will likely represent a lower hurdle.
In Cognos, the plaintiff had moved from Calgary to Ottawa to take the new opportunity and then back to Calgary upon starting the action. The trial judge awarded the sum of $11,972 for the loss on the purchase and sale of his Ottawa home and $252 for the costs of obtaining new employment. This decision was set aside on appeal and restored by the Supreme Court.