Mitigation Issues

The British Columbia Case Law – Mitigation Expenses

The case law in this jurisdiction has taken a view which is contrary to the remaining common law provinces, which has taken a mid-range view, and for that reason should be viewed as qualitatively distinct.

The British Columbia Supreme Court denied recovery of mitigation expenses in Dutt v British Columbia Hydro, a November 1986 decision of Wong, L.J.S.C., on the basis that had it given the employee proper working notice, no such claim would have followed.

This of course misses the point by three miles or more. The mitigation obligation arises (1) because the employer is in default of its obligation to give working notice and (2) the employee claims such lost compensation to which (3) the employer asserts a mitigation obligation. The consequential costs incurred in the mitigation process arise due to this default and due to the resultant plea.

This theory was repeated in Shirra v DMR Group in May of 1993 and again in Beatty v Canadian Mill Services in July of 2003.

There has not, however, been universal acclaim given to this view in British Columbia.

In MacWilliams v Rudy’s Petroleum Services, Drossos L.J.S.C., in June of 1990, allowed the costs of reasonable mitigation expenses, but not the costs of relocation. The plaintiff was dismissed from his position as petroleum technician and serviceman on October 11, 1988 in Kelowna. He obtained employment in the Lower Mainland in mid-November 1988 to commence January 9, 1989. After January he sold his home and moved to Abbottsford in February 1989. The costs associated with the sale of his residence totaled $10,335. These expenses related, hence, to income earned which did not reduce the employer’s liability as the notice period was found to be three months.

In coming to this decision, the trial judge determined that the mitigation expenses could not exceed the claim for maximum severance in the period. The example given was a severance claim of 3 months totaling $3,000 may be offset by mitigation expenses. Presume at the beginning of month 2, a new position is obtained. The damage claim is hence reduced by $2,000. Should mitigation expenses total $1,000 ( i.e., less than the $2,000) then such claim should be awarded to the employee. However the mitigation expense should be capped at the savings attributed to the mitigated income of $2,000.

These two contrary views were considered by Errico, J. in West v Jim Pattison Charters, a decision made in March of 1994. The plaintiff was employed initially as a jet aircraft pilot commencing on May 17, 1988. As of termination on December 18, 1992, he held the position of chief pilot, earning an annual salary of $60,000. Reasonable notice was found to be 6 months which hence took the plaintiff to June 18, 1993.

The plaintiff obtained new employment with the British Columbia government at $32,500 following a search for employment across Canada effective April 26. His new employment was based in Victoria to where he moved on July 1, 1993. This resulted in a claim made of $31,265 for expenses incurred in selling and buying a new home.

The trial judge reviewed the caselaw in British Columbia which militated against the claim of moving expenses. However, no principled decision was made. The judge found that the plaintiff did not incur these expenses to accept new employment, but "rather, his new home was purchased so he could continue with his employment at Victoria”.

While this fact finding may be hard to rationalize, such became the deciding factor. The court went on to state, that had the contrary finding been made, the allowable moving expenses would have been allowed to a cap of the sum by which the claim was reduced by the mitigated income from April 26, 1993 to June 18, 1993. That really should have been the result. The conclusion that he bought the new home to continue his newly found employment is ludicrous.

In July of 1997, the British Columbia Supreme Court in Olney v Powell River Regional Hospital District, a decision of Justice Hutchison allowed mitigation expenses. The defendant, however, had conceded that alternate employment was not obtainable in Powell River and hence it followed, as the court determined, that she was entitled to damages arising from the move. This case is more akin to the “you moved me to a remote location and hence move me back” implied term.

The plaintiff had moved to Powell River following the sale of her residence in Langley and then moving herself and her four children to Powell River. The plaintiff moved to Powell River because of the offer as “Inasmuch as the PRH had extolled the virtues of Powell River as a place of work and bring up her children”.

The court concluded that the “ensuing damages were in fact foreseen by management and thus an objective foreseeability test is easily met”.

The plaintiff, who had been employed by the defendant as a payroll clerk, travelled to Victoria for interviews and also to Vancouver where she retained an employment agency to assist her. She did find a temporary six month job as a maternity leave replacement at a comparable salary while still seeking permanent employment. This temporary position began on the last month of the notice period. She did find employment at Nanaimo after 4 months of unemployment.

The notice period was set at four months. The plaintiff sought recovery of her moving costs to the lower Mainland and also for the move to Nanaimo. All expenses of seeking employment in the Lower Mainland and in Victoria were allowed.

The moving expenses in the sum of $11,759 were allowed as “they were clearly in the mind of the employers when they advertised the job sought by Ms. Olney”. “The employer clearly knew that the likely applicant would have to move and was aware at all times material that a move back to the Lower Mainland would be required to find alternative employment”.

The job search expenses were found to total $750. The issue of the cap was raised but of no practical consequence as the sum earned by mitigated income for the last month of the notice period was $2,669. For reasons unknown to this writer, the mitigated income for that month of $2,669 was reduced not only by the expenses of $750 but also by another 30% representing the “some contingency should be taken into account for the future possibility that the known temporary job might not be followed immediately with further employment”. This, of course, is an aberration designed to accommodate the claim of a single mother with four children.

This issue was again front and centre in the May 2000 decision of Lowry, J. in Ste-Croix v Placer Dome, also a British Columbia Supreme Court case.

The plaintiff began employment with the defendant in Quebec. She was terminated in that position in 1997. While seeking employment elsewhere, she accepted a new function of Co-ordinator of Global Exploration Development in Vancouver in the spring of 1998, for which the company paid a moving allowance. In early 1999, she became manager of this department. It was shut down four months later. Apart from a short term position in January of 2000, she found new employment in Quebec eleven months following termination. Seven months was assessed as the notice period.

The plaintiff sought reimbursement of her job search expenses of $3,691, most of which was incurred in travelling to mining conventions, of which some, in turn, were incurred in the notice period. She also claimed for the capital loss of $12,000 for the sale of her Vancouver residence.

The company argued that the recoverable mitigation expenses, if any, should be capped to the sum achieved by successful mitigation for the short term position, which was $2,878.

Lowry, J. concluded that neither genre of the sums claimed as mitigation expenses were recoverable as such expenses “resulted from the termination of her employment, not from Placer Dome’s failure to give her reasonable notice”.

The court reviewed the West decision referenced above and the two conflicting decisions referenced within it, Dutt and MacWilliam and concluded Dutt had it right. To that end, the court saw the logic behind the denial based on the proposition that had the employer given working notice, the employee would have in any event incurred the expenses for which compensation is now sought.

This, of course, should not be the law and is the flaw of the ratio. An employee who has received working notice has no mitigation obligation. There is no default by the employer and there hence is no damage claim and no need to mitigate. The mitigation claim arises only where there is a default such as an immediate termination or inadequate working notice, the assertion of a damage claim and the consequential plea of the need to mitigate the loss. All that gives rise to the expenses incurred in that process and hence a claim for such expenses should follow, capped only by the premise of reasonableness, not dependent on the achievement of new income. This should be the law and is so in Ontario and every other common law jurisdiction.

The Ste-Croix decision was followed in Adams v Fairmont Hotels & Resorts Inc. in May of 2009 by Justice Wedge of the British Columbia Supreme Court and in Zaitsoff v Zaitsoff Celgar Limited in March of the same year, a decision of Justice Fenion of the same court.

It remains a constant debate as to what is the correct law in this province. Porta v Weyer Haeuser, a November 2001 decision of Cullen J. reviewed the above authorities and concluded reasonable mitigation expenses were recoverable. The argument that it was foreseeable that the moving expenses would follow and hence be recoverable was not successful.