Canadian Employment Law Today

Canadian Employment Law Today | 9 Canadian HR Reporter, a Thomson Reuters business 2017 Cases and Trends common law and statutory entitlements. However, the court then erred by declining to deduct from the common law damage award any of Brake's earnings during the notice pe- riod — about $40,000 — because that money was not "received in mitigation of loss." How did the court make this error? Typically, an employee's earnings during the notice period are considered "mitiga- tion income" and deducted from any award of common law damages. In the 20 months following Brake's dis- missal, the court found she made reasonable efforts to find alternative employment and earned $40,000 by increasing her hours at Sobey's and working non-managerial posi- tions at Tim Hortons and Home Depot. In a surprising ruling, the trial judge and Court of Appeal held that none of that $40,000 was "received in mitigation of loss." The Court of Appeal's reasoning was three-fold: All earnings accrued during the "statuto- ry entitlement period" are not "mitigation income." Here the court erred by excluding from mitigation income all income earned by Brake in the 34 weeks following her dismissal, on the basis that income was earned during the "statutory entitlement period." ere are several problems with this analysis. First, a "statutory entitlement period" does not exist in fact or law. It is not an actual period of time — while an employee may be provided notice of termination, where this does not occur the statutory entitlement is to payment (termination and severance pay). Second, the court appears to have con- fused a statutory payment with all other in- come during the notice period, based on a misreading or misunderstanding of Boland. In Boland, the employee claimed only the minimum statutory entitlement — no com- mon law damages — and the judge rightly declined to deduct the employee's post-dis- missal earnings from the statutory payment. Had there been a claim for common law damages in Boland, the court would have re- duced that claim by the amount of the statutory termination and severance payments and any income earned during the notice period. This is consistent with Yanez v. Canac Kitchens, in which the court deducted from the common law notice entitlement all earnings post-dis- missal, despite some earnings having accrued in what the Court of Appeal described as the "statutory entitlement period." It is therefore incorrect to rely on Boland for the concept of a "statutory entitlement pe- riod" or the position that income earned during this notional period is not mitigation income. Those were not the facts, the decision does not stand for that proposition, nor is there any principled reason to reach this conclusion. Third, there is no basis in law to shelter in- come earned during the notice period, other than a statutory payment and supplementary income. Indeed, the court offers no substan- tive explanation for this part of its ruling, other than to misstate Boland: "Since the employment income that Ms. Brake earned during her statutory entitle- ment period is not deductible from the dam- ages award, the trial judge ought to have de- termined her statutory entitlement period and identified which items of employment income were attributable to that period and which were attributable to the balance of the notice period." "Supplementary income" earned dur- ing the period of common law notice is not "mitigation income." is part of the ruling is not controversial. If an employee works two jobs and is dismissed without cause from one, income earned during the common law notice period from the second job is not "mitigation (replacement) income" because the employee would have earned it anyway. is is the basis on which the court excluded much of Brake's post-dismissal earnings from Sobey's. e Court of Appeal declined to identify in what circumstances an increase in supple- mentary income during the notice period would change it to replacement income. at, the court said, is "for another day." Income earned from a non-comparable job during the period of common law no- tice may not be deducted. is is another error. In a separate but concurring decision, Justice Feldman (expanding on comments of the trial judge) went even further, holding "mitigation income" does not include earn- ings from a position so inferior to the origi- nal position the employee would not breach the duty to mitigate if she turned it down. On this basis, Justice Feldman excluded all of Brake's income earned during the common law notice period. However, Justice Feldman confused an em- ployee's right to not accept markedly inferior replacement work with income earned dur- ing the notice period. Although an employee may not be obliged to accept an inferior posi- tion to mitigate damages, once accepted, in- come earned should be treated as mitigation income. If not, the employee unjustly benefits twice — once from the replacement earnings and again from the damage award. e majority distanced themselves from this narrow interpretation of mitigation in- come and stated that employment income earned during the notice period is generally to be treated as mitigation of loss. Final thoughts e court's error of excluding from mitiga- tion income all income earned during the notional "statutory entitlement period" is disappointing and will need to be corrected by the Court of Appeal or Supreme Court of Canada. As of this writing, neither party has sought leave to appeal. Justice Feldman's decision, though nei- ther accepted by the majority nor binding, is troubling to the extent it even suggests "mit- igation income" does not include earnings from work not comparable to the original position. at proposition is simply incon- sistent with the law of mitigation. Finally, the decision stands as a reminder to employers of the importance of doing whatever can reasonably be done to help a dismissed employee find comparable re- placement work. For more information see: • Brake v. PJ-M2R Restaurant Inc., 2017 Car- swellOnt 7619 (Ont. C.A.). • Boland v. APV Canada Inc., 2005 Carswel- lOnt 532 (Ont. Div. Ct.). • Yanez v. Canac Kitchens, 2004 Carswel- lOnt 5351 (Ont. S.C.J.). Statutory payments different from mitigation income « from WHEN MITIGATION on page 3 ABOUT THE AUTHORS RHONDA COHEN AND TIM ALLEN Rhonda Cohen is the managing director, chief privacy officer, and a founding member of Sherrard Kuzz LLP, a management-side employment and labour law firm in Toronto. Tim Allen is an employment and labour lawyer with Sherrard Kuzz LLP. They can be reached at the firm at (416) 603-0700, (416) 420-0738 (24 Hour) or by visiting www.sherrardkuzz.com.

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