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A recent Ontario appeal addressed the issue of whether a terminated employee can sue their former employer if they mitigated their damages by finding a higher-paying job?

What Happened?

The employee worked for the employer as a delivery driver from June 2006 to May 30, 2014. His hourly rate was $12. He worked 37.5 hours per week, resulting in weekly remuneration of $450. He did not work overtime for the employer.

On February 21, 2014, the employer gave the employee notice that his employment would terminate effective May 30, 2014; he was given three months’ working notice. The employee was 65 years old at the time of termination. He was terminated without cause.

Two weeks after the end of the working notice, the employee found replacement employment. In this new employment, the employee worked as a driver, with similar responsibilities to those in his former employment.

At his new job, the employee was paid $11 per hour. He also worked some overtime in his new employment, for which he was paid time-and-a-half ($16.50 per hour).

As a result, the employee earned more at his new employment than he had with the employer: in 2014, he earned one to two thousand dollars more and in 2015, he earned more than $3,000 in excess of what he would have made with his former employer.  

The employee filed an action with Small Claims Court for damages for the two weeks of his unemployment between jobs.

Small Claims Court Decision

The trial judge found that the employee was unemployed for two weeks before starting his new job and the employee’s new job was comparable to and replaced his job with the employer. The judge awarded damages for wrongful dismissal for two weeks’ lost wages ($900) for this period of unemployment. 

The employee argued that his overtime wages should not be included in the calculation of his new income, which the trial judge accepted.As a result, the trial judge also made an award of damages of $742 for the reduction of $1 per hour in the employee’s base rate of pay.

The trial judge also found that the employee was required to retire because he reached the age of 65. The trial judge found that this forced retirement was discrimination on the basis of age within the meaning of the Ontario Human Rights Code and awarded general damages for this discrimination fixed at $8,000.  

The employer appealed.

Appeal Decision

The court found that there was no reason to exclude the overtime earnings from the mitigation income; the employee’s opportunity to work the overtime hours arose because of his new employment.

The court explained that it is a general principle that all earnings from replacement employment apply as mitigation of loss of employment earnings from wrongful dismissal. As a result, the court found that the trial judge’s conclusion was an error in principle that fell outside the general principles of mitigation. The court allowed this aspect of the appeal and set aside the trial judge’s award of damages of $742 for the reduction of $1 per hour in the employee’s base rate of pay.

The court then set out the remaining issue as follows: 

“The issue is thus: a wrongfully dismissed employee is out of work for a period of time and then finds replacement employment from which he earns more than he had been earning at his former employment. Do the surplus earnings from the new employment serve to reduce the damages for the period of unemployment?”

Although the court reviewed one case that found that an employee is entitled to no damages if they find a better paying job, it disagreed with this position. Instead, the court explained that where an employer gave adequate working notice for the entire notice period, the worker would have been paid while he continued work up until commencing new employment, with no duty to account back to his old employer for his increased wages. 

As a result,  the appeal was only allowed in part, to reverse the trial judge’s award of damages of $742 for the reduction of $1.00 per hour in the employee’s new employment. The balance of the Small Claims judgment was upheld in the amount of $8,900. Additionally, the employee was awarded $5,000 in costs for the appeal.

Get Advice

At Campbell Bader LLP, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

If you have questions about unfair practices in the workplace, wrongful dismissal, or any other employment matter, contact the Mississauga employment lawyers at Campbell Bader LLP. Our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at 905-828-2247 to learn how we can help.