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“If It’s Good Enough For You, It’s Good Enough For Me”, Says Ontario Court Of Appeal: Employee’s Notice Period Reduced for Failing to Accept a Comparable Position

In Humphrey v. Mene Inc., 2022 ONCA 531, the Court of Appeal for Ontario addressed the employer’s appeal and employee’s cross appeal of the decision by the motion judge in Humphrey v. Mene, 2021 ONSC 2539.

FACTS

In this case, the employee was employed by the Company for approximately three years. At the time of her dismissal, the employee was 32 years old and held the position of Chief Operating Officer (“COO”). The employee remained unemployed up until the date of the motion for summary judgment. The motion judge awarded the employee damages of $81,275.45 (in lieu of 12 months’ notice less one month’s compensation for unreasonable mitigation and the ESA amount she had already received), as well as aggravated damages of $50,000 and punitive damages of $25,000.

The employer appealed and asserted that the motion judge erred in 3 ways: (1) in determining the period of reasonable notice; (2) in her approach to and conclusions about mitigation; and (3) in concluding that the employee was entitled to aggravated and punitive damages, as well as in her assessment of the quantum of such damages. The employee cross-appealed asserting that the motion judge erred in her approach to punitive damages and sought an increased amount.

DECISION

The Court of Appeal allowed the employer’s appeal on the mitigation issue but dismissed the remaining grounds of appeal and the employee’s cross-appeal. In arriving at this decision, the Court of Appeal reiterated that the burden is on an employer to establish a failure to mitigate damages and that “the question is ‘whether [the employee] has stood idly or unreasonably by, or has tried without success to obtain other employment’” (para 53).

In its analysis, the Court found that the motion judge erred when she concluded that the employer “… had failed to establish that a position [the employee] was offered seven months after her termination was “comparable” for the purpose of mitigation” (para 5). The Court of Appeal focused on the determination of what was “comparable”.

The evidence revealed that the employee did not accept an offer of VP E-Commerce that she received in or around October 2019. The motion judge noted that when cross-examined, “[the employee] explained that her initial conversations with this potential employer contemplated a broader role in senior management, and that she declined the offer because it was not for a broad-based senior leadership role” (para 56). The motion judge consequently concluded that the employer “had not provided the Court with persuasive evidence or analysis on whether this position was comparable in terms of role, as well as in terms of all aspects of the remuneration including stock options, bonuses etc.” (para 56)

In determining that the motion judge erred, the Court of Appeal wrote:

[57]      With respect, the motion judge set the bar too high on the issue of mitigation in addressing this evidence. Comparable employment does not mean identical employment. It means “a comparable position reasonably adapted to [the plaintiff’s] abilities”: Link v. Venture Steel Inc., 2010 ONCA 144, 259 O.A.C. 199, at para. 73, leave to appeal to S.C.C. requested but appeal discontinued, 33690 (April 30, 2010); Dussault v. Imperial Oil Limited, 2019 ONCA 448, 2019 C.L.L.C. 210-053, at para. 5. It was sufficient for [the employer] to rely on evidence that [the employee] had been offered a senior management position with compensation that was comparable to or greater than what she earned [with the employer]…

[58]      In these circumstances, it is difficult to conceive of what further evidence an employer could adduce to establish that an employee has unreasonably rejected an offer of comparable employment. In her mitigation journal, [the employee] recorded six meetings or other interactions, over the course of about a month, with this prospective employer. The mitigation journal made no mention of a job offer, and simply noted that the company’s response was: “Company determined too early-stage to hire; may reach out in future”. [The employee] in fact received an offer of employment in October 2019 for the position of “VP E-Commerce”, which “can change as the company grows”, with compensation of $125,000 base salary, “at least” $25,000 in options, $75,000 bonus “based on achieving metrics jointly determined”, and benefits. It was only when [the employee] presented a counter-offer and requested, among other things, a C-level title and greater compensation, that the company advised that it did not have the budget and organization to meet her requests.

 [59]      In my view, the availability of this comparable role seven months post‑termination means that [the employee] turned down a position that could reasonably have mitigated her damages. While the onus on a defendant in this context is a heavy one, on the evidence before the motion judge, [the employer] met its obligation of demonstrating that [the employee’s] damages for the balance of the notice period could reasonably have been avoided. [The employee] had no obligation to accept the offer made to her, but the effect of her rejection of this comparable position was to limit her recovery from [the employer] for compensation in lieu of notice to the point at which this comparable job offer was made, seven months post-termination.

As a result, the Court of Appeal gave effect to this ground of appeal and reduced the employee’s damages in lieu of notice to the equivalent of six months compensation.

KEY TAKEAWAYS

This is a welcome decision for employers as it demonstrates the type of evidence that is required to establish that an employee has failed to mitigate their damages. Although there is a heavy onus on an employer to demonstrate that an employee has failed to mitigate their damages, an employer may meet this threshold where they can establish that the employee rejected an offer of employment for a position that was comparable in both compensation and character.  Importantly the job does not have identical in either aspect to qualify as a reasonable mitigation option.

The experienced team at CCPartners can assist employers experiencing difficulty navigating their employment litigation process and in minimizing their liability. Please contact one of our lawyers who can assist with all of your workplace concerns.

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