Wrongful Dismissal Pay is Reduced by All New Income, Even From a Low-Pay Job Taken in Desperation
Many lawyers and judges appear to have misread the Court of Appeal's 2017 decision in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 (CanLII), citing the case for a legal proposition which it never actually establishes.
Notice of Termination
Employees in Ontario are entitled to advanced notice of termination or to equivalent pay instead of actual notice.
There are two legal sources for an employee’s notice entitlement:
The Employment Standards Act, 2000 (the “ESA”) is legislation which provides minimum entitlements for “termination pay” and “severance pay.”
The ESA minimum entitlements coexist with a greater “common law” entitlement to receive “reasonable notice” of dismissal (unless a written contract validly says otherwise).
The “reasonable notice” standard is invariably higher than the ESA minimums. Judges decide what is “reasonable” by looking at several standard factors. In general, older, longer-serving, high-level employees tend to get more notice than younger, shorter-serving, low-level employees.
Mitigation
Without exception, the statutory ESA amounts must be paid to those entitled to them. By contrast, an employee’s entitlement to pay-in-lieu of “reasonable notice” can be reduced by operation of the doctrine of “mitigation.”
Dismissed employees are obligated to “mitigate” the losses they suffer by trying to find a new job. If the employee finds new work before the end of the reasonable notice period, the former employer’s obligation to pay will be reduced dollar-for-dollar by any new income earned outside the statutory ESA period but still within the “common law reasonable notice period.”
Confusion for the Legal Profession
Several aspects of the law regarding mitigation were clarified by the Court of Appeal for Ontario in its 2017 decision in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 (CanLII).
However, one important aspect of this ruling appears to have been repeatedly misread by the legal profession.
Lawyers and judges alike cite Brake for the principle that, when a dismissed employee’s circumstances force them to take an inferior job, the income earned in that position does not count as mitigation income and need not be deducted from the wrongful dismissal pay owed by the former employer.
In fact, Brake stands for the opposite proposition, that all new income earned outside the statutory ESA period but still within the “common law reasonable notice period” counts as mitigation income.
Source of the Confusion
The confusion arises because more than one judge of the three-judge panel contributed written reasons to the court’s decision. Justice Gillese wrote for the majority, while Justice Feldman provided brief additional reasons of her own.
Normally, when an appeal judge disagrees with the majority decision, that judge’s reasons will be marked as a “dissent.” While a dissent may be instructive to readers, it represents a minority view of the court and does not become legally binding authority on lower-court judges.
A judge may also agree with the majority while providing additional analysis of their own. In those instances, that judge’s reasons would be marked as “concurring.”
In Brake, Justice Feldman’s reasons were marked as “concurring.” However, they were only marked as such because Justice Feldman was concurring in the result of the case. Her reasons actually reveal a disagreement with the majority of the appeal panel on the particular point about which she was writing. Since the outcome of the case did not turn on this point of law, Justice Feldman’s comments were not described as a “dissent.”
The label, “concurring,” misleadingly signaled to many readers that Justice Feldman’s comments were consonant with the views of the majority of the court. In fact, the majority took the opposite view on that particular point.
The majority’s analysis did not dwell on the point, dedicating only a single paragraph (out of 153) to say, in passing, that new income counts as mitigation income even when earned in an inferior job. The fleeting comment is easily lost in the mix of the decision. By contrast, Justice Feldman dedicated more analysis to the point and provided quite persuasive reasons explaining why the character of the new job should matter.
But Justice Feldman’s minority view is not the law.
Awkward Legacy
The somewhat awkward legacy of these circumstances is that, in the two years since the decision was released, lawyers and judges have been regularly citing Brake for a legal proposition which the case never actually established.
Justice Feldman’s minority opinion in Brake has been cited as though it were legally authoritative by,
Justice H. M. Pierce in MacKenzie v. 1785863 Ontario Ltd., 2018 ONSC 3442 (CanLII), par. 13;
Justice Nishikawa in Groves v. UTS Consultants Inc., 2019 ONSC 5605 (CanLII), par. 106;
Adjudicator John McNamee in Hussey v. Bell Canada, 2019 CanLII 51848 (CA LA), at page 12; and
Justice Smith in McLean v. Dynacast Ltd., 2019 ONSC 7146 (CanLII), par. 87.
And, as of October 13, 2019, seven out of eleven lawyer commentaries written about the Brake decision on the Canadian Legal Information Institute database (CanLII) incorrectly cite Justice Feldman’s minority opinion as though it were binding legal authority (or mistakenly indicate that the majority expressed no opposing view on the issue).
