Williams HR Law LLP

KEY POINTS FOR EMPLOYERS FROM RECENT DECISIONS REGARDING NOTICE AWARDS AND EMPLOYEES’ DUTY TO MITIGATE

July 27, 2022

Three recent decisions have reconfirmed the factors courts will consider in calculating reasonable notice awards, including which “exceptional circumstances” will increase the presumptive 24-month cap, and how former employees can fail to mitigate their damages.

Ontario Court of Appeal (“ONCA”) Upholds 26-Month Reasonable Notice Period For “Exceptional Circumstances”

In Currie v Nylene Canada Inc [Currie], the ONCA upheld the trial judge’s decision to award Ms. Currie, the employee, a 26-month reasonable notice period. The employee’s “unique situation” and sufficiently “exceptional circumstances” justified exceeding the presumptive cap of 24 months of reasonable notice.

In dismissing the appeal, the ONCA found there was ample support to uphold the 26-month reasonable notice period, including that the employee:

  • began working for the employer when she was 18 years old and worked there for her entire career, ultimately rising to become the Chief Operator reporting to the Shift Leader;
  • was dismissed after 40 years of service, near the end of her career when she was 58 years old;
  • possessed specialized and not easily transferable skills which made it difficult to find alternative suitable employment. Despite her best efforts to mitigate her damages by improving her basic computer skills, she was unlikely to succeed in securing alternative employment; and
  • was essentially forced to retire.

For more information on the Currie trial decision, please see our previous blog here.

Rejection of Comparable Positions and Delay in Mitigating Can Significantly Reduce Reasonable Notice Period

In Humphrey v Mene Inc [Humphrey], the ONCA allowed the appeal in part and reduced the employee’s notice period by six months—from twelve months to six months—due to her failure to mitigate damages by rejecting an offer for a comparable role. The employee, Ms. Humphrey, had worked for Mene Inc., the employer, for almost three years prior to being dismissed from her role as the Chief Operating Officer.

Ms. Humphrey declined the offer to become a prospective employer’s VP of E-Commerce because it was not “for a broad-based senior leadership role” and did not provide greater compensation. The ONCA disagreed with the motion judge’s finding with respect to the employee’s rejection of the job offer, commenting that there is a difference between identical employment and comparable employment. The ONCA found that Ms. Humphrey had unreasonably rejected a “comparable position reasonably adapted to [her] abilities” seven months post-termination.

Notably, the role Ms. Humphrey rejected was a senior management position that provided comparable compensation to what she earned with the employer.

While the ONCA acknowledged that the employee had “no obligation to accept the offer made to her”, but the consequence of that rejection would limit her reasonable notice, and the employer nonetheless successfully discharged the heavy onus to prove the employee’s failure to mitigate her damages.

Although the ONCA agreed with the motion judge that the employee’s six-month delay in applying for jobs was a factor in reducing her twelve-month notice period to six months of notice, the ONCA noted that not all delays will amount to an automatic reduction of an employee’s reasonable notice period.

Finally, the ONCA also agreed that while there may have been other positions for which Ms. Humphrey could have applied, the employer failed to establish that those positions were comparable.

In Patel v Crimp Circuit [Patel], the Ontario Small Claims Court reduced an employee’s notice period by nine months—from fourteen months to five months—partly due to the employee’s failure to mitigate by pursuing a career change post-termination and rejecting comparable employment offers. Specifically, the decision was grounded in the dismissed employee’s:

  • failure to accept a job offer to do comparable work with the former employer’s purchaser;
  • refusal to apply to positions within the industry, and
  • choice to pursue job opportunities in an industry for which he had no relevant training or experience.

For more information on this decision, please see our previous blog on Patel here.

Takeaways for Employers

For employers, these recent decisions emphasize the importance of proving an employee has failed to mitigate their damages.

In Humphrey and Patel, the employees failed to mitigate their damages, as Ms. Humphrey delayed in applying to new positions, Mr. Patel applied to positions for which he was not qualified, and both rejected positions comparable to their previous roles. As such, the employers benefitted from significant reductions in the damages owed.

Currie is distinguished from these cases, as the employee’s computer training to improve her employability was factored into her attempts to mitigate and supported the ONCA’s decision to maintain the otherwise extraordinary damages. Further, exceeding the presumptive cap of 24 months of reasonable notice is rare and Ms. Currie’s 26-month notice period was upheld due to her sufficiently unique facts.

As outlined in our previous blog post regarding the Patel decision, employers can realize significant savings if they make dismissed employees aware of comparable employment opportunities. Employers have an interest in their former employees becoming re-employed after dismissal to reduce damages owed by the employer. Alternatively, a former employee’s failure to pursue comparable opportunities can ground an employer’s argument that the reasonable notice period should be reduced correspondingly, as was the case in Patel and Humphrey.

Employers should still prioritize avoiding the issue of common law reasonable notice being owed to dismissed employees, as common law entitlements often far exceed the minimum entitlements under the Employment Standards Act, 2000 [ESA]. Employers should provide employees with enforceable employment agreements which properly limit their employees’ termination entitlements to either the minimum standards under the ESA, or more than the ESA but less than common law by properly ousting any common law entitlement. Where the employer is providing for more than ESA minimums but less than common law entitlements, the employer should consider including a mitigation term as part of the termination clause.

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