In a wrongful dismissal claim in Ontario, it is up to the employer to prove that employees failed to mitigate their damages and that had they taken reasonable steps to do so, they would have likely obtained equivalent or reasonable employment.  If the employer meets this burden, the notice period may be reduced or even eliminated.  In Lake v. La Presse (2018) Inc., 2021 ONSC 3506, an eight-month reasonable notice period was reduced to six months when the court was convinced that the employee failed to take reasonable steps to mitigate her damages. 

Background

For 5.6 years, until 2019 when at age 52 her employment was terminated without cause, the employee was general manager of the employer’s Toronto division, which generated advertising revenue for the employer in the places within Canada where English is spoken by the majority of the population. The employee was responsible for client development, training and management of the sales team, and sales strategy development and implementation.  The employee’s position was the most senior in Toronto, and she had eight direct reports (down from 13 at one point).  The employee’s salary when her job was terminated was $185,000 plus benefits, including a bonus.  The parties agreed the employee was entitled to reasonable notice. 

Decision

Reasonable notice period 

The court held that the employee’s reasonable notice period should be eight months.  It made this decision after concluding that:

• While the employee held a position of some responsibility, she was not a key member of the management team;

• She was employed for “neither a terribly short not terribly long period of time”; and

• Although she was at an age where it might be harder to find work, she had significant experience in management and sales, especially in media. 

Entitlement to compensation for loss of bonus

The court held that the employee was entitled to damages in respect of her bonus for (i) January 1, 2019 to March 26, 2019, the date of her dismissal; and (ii) the reasonable notice period. 

The bonus provision in the employee’s employment contract provided:

Your target bonus will be 25% of your basic salary and will be payable upon attainment of corporate objectives.  The bonus can reach 35% of basic salary if the objectives are exceeded.  

The employee had received a bonus each year of her employment and it increased in size each year. 

The court applied the two-step analysis developed by the Ontario Court of Appeal (OCA) in Paquette v. Tera-Go Networks Inc., 2016 ONCA 618, which required that it:

• Consider whether the bonus was an integral part of the employee’s compensation package; and

• If so, ask if there is any language that would specifically remove the employee’s bonus entitlement.

The court decided that the bonus was an integral part of the employee’s compensation package because it was substantial, was a significant part of her compensation, had been growing over time, was always paid until 2019, and was conditionally tied to meeting corporate objectives that had always been met in the past. 

Furthermore, the court concluded that neither the employment contract or the corporate document in which the employer annually set out its corporate objectives unambiguously removed or altered the employee’s common law right to compensation for her lost bonus. 

Mitigation of damages

The court reduced the employee’s reasonable notice period from eight months to six months after deciding that, for the following reasons, the employee failed to take reasonable steps to mitigate her damages:

a.   She waited too long before beginning her job search. It is reasonable to expect her to have begun in earnest as of May 1, 2019, but she delayed for an additional month before seriously looking for work;

b.  She aimed too high. There is nothing wrong with her having applied for vice president roles, but she should have been applying for less senior roles as well, as general manager, and eventually as a sales representative if she continued to remain unemployed;

c.   She waited too long before applying for any jobs, and she applied to very few jobs.

In these circumstances, I infer that, had the plaintiff expanded the parameters of her job search, searched earlier, and applied for more positions, her chances of obtaining a position would have improved significantly. Although there is no direct evidence in front of me of other positions that the plaintiff could have applied for, I find it is reasonable to assume that they existed. If vice president roles were available, more junior roles were also available. The plaintiff chose unreasonably to limit her job search, which had a corresponding impact on her ability to find work. (paras. 68 and 69)

Bottom Line for Employers

Employers that must pay damages to an employee for wrongful dismissal should always consider whether they can meet the burden of proving that the reasonable notice period should be reduced or eliminated because the employee failed to take reasonable steps to mitigate their damages and thereby likely contributed to their inability to obtain equivalent alternative employment.  Factors to consider in conducting such an analysis include whether:

• After an appropriate period of readjustment, the employee should have begun their search sooner;

• The employee failed to apply for an adequate number of positions; and 

• The nature of the positions the employee applied for prolonged their search, e.g., the employee applied for roles more senior than what they held previously, thereby presenting them with fewer opportunities, and only those for which they lacked the necessary experience and were less likely to be considered.