OCA decision likely to spur litigation
By AdvocateDaily.com Staff
A recent Ontario Court of Appeal (OCA) decision that breaks down the notice period of when a worker is terminated into two parts creates a negative outcome for employment law, says Toronto employment mediator and arbitrator Barry B. Fisher.
“I don’t think it’s a sensible policy rule,” he says. “This is a classic example where the application of the law in a theoretical sense results in a common-sense unfairness.
“Sometimes what happens in appeal courts is they make what seems to be a fair decision for the matter in question, but they do not appreciate how it plays out in the rest of the law.”
In the case, the OCA panel ruled that an ex-employee’s income during their statutory severance and termination period is not subject to deduction as mitigation income from the damages award her former employer was ordered to pay.
The duty of the complainant to mitigate or lessen their damages is a basic principle of contract law, he says. In the case of wrongful dismissal, the claimant mitigates the damages if the plaintiff gets a job during the notice period.
“So the law of mitigation to some degree discourages people from doing what they should do because the employer is getting the full credit for the work,” says Fisher. “Now comes along this case.”
The appeal panel determined that when a terminated employee must take substantially inferior employment, the payment from that work is not mitigation income and won’t be deducted from the amount the former employer owes.
The complainant was a 62-year-old McDonald's manager who had another part-time job prior to her dismissal. The income from that job, provided it was the same after the dismissal, was not subject to mitigation, so it didn’t lessen the amount her ex-employer owed her.
She did, however, take a non-managerial or lesser job during the notice period. The OCA decided that the lesser job would not trigger any mitigation deduction.
“The Court of Appeal confirmed a couple of things that changed the law, in my opinion,” says Fisher. “This case creates a new concept. It breaks the notice period into two parts and even gives them titles: statutory entitlement period and then the balance of the notice period.”
The OCA found that the statutory entitlement period is not subject to mitigation, but income earned during the balance of the notice period is subject to a deduction from mitigation income.
Given two identical situations, says Fisher, if one person works during the first part of the notice period that amount is not deducted from the sum he is owed by his former employer. However, if someone works during the latter period, earnings are deducted from the damages owed him.
“It creates inequity, to say nothing of the fact that there’s no such thing as a statutory entitlement period,” says Fisher. “We’re treating people in virtually identical situations — they’ve both been unemployed, they’ve both been fired. One guy gets a temporary assignment early, the other guy gets a temporary assignment late, one guy gets more money than the other. In my opinion, it’s an unnecessary unfairness, based purely on a technicality, which is when the income was earned.
“Mitigation income could never eat into your Employment Standards Act minimums. This case is different. It is setting up that statutory entitlement period and saying that it’s free of mitigation, any income you earn during that period will be ignored.”
The second aspect of the case that is of concern to Fisher is how that income from the lesser job was treated during the balance of the notice period. The OCA determined it is not deductible because it was a “vastly inferior” position.
“It’s created another area of conflict as to what is going to be interpreted to mean ‘much inferior’ or ‘vastly inferior,’” says Fisher. “Where’s the dividing line going to be?”