by Rhonda B. Levy, George Vassos and Monty Verlint of Littler

In Lake v. La Presse, 2022 ONCA 742, the only issue on appeal was whether the lower court erred in reducing the employee’s wrongful dismissal damages for failure to mitigate. The Ontario Court of Appeal (OCA) set aside the lower court’s judgment in Lake v. La Presse (2018) Inc., 2021 ONSC, discussed here, as it found an error in the reduction of the reasonable notice period of eight months to six months for failure to mitigate. 

Background Pertaining to the Mitigation Issue

The employee, general manager, age 52, was employed for 5.6 years when her employment was terminated without cause. The parties agreed the employee was entitled to reasonable notice. 

Lower Court Decision re Mitigation of Damages

The lower court decided the reasonable notice period should be eight months; however, it reduced it to six months after deciding that, for the following reasons, the employee failed to take reasonable steps to mitigate her damages:

1. 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.
2. 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.
3. She waited too long before applying for any jobs, and she applied to very few jobs.

The court inferred that, had the employee 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 the court acknowledged that there was no direct evidence in front of it of other positions the employee could have applied for, it assumed that they existed, noting that if vice president roles were available, more junior roles were also available. The lower court’s view was that the employee chose unreasonably to limit her job search and it concluded that this had a corresponding impact on her ability to find work.

OCA Decision  

The OCA began its analysis with a summary of the following legal principles respecting mitigation of damages for wrongful dismissal:

• The duty to mitigate is based on the premise that the employer is not responsible for losses that an employee could reasonably have avoided.
• The burden is on employer to prove: (1) that the employee failed to take reasonable steps to mitigate their damages; and (2) that if they had done so, they would have been expected to secure a comparable position reasonably adapted to their abilities.
• The determination of whether an  employee took reasonable steps in mitigation, including whether the failure to mitigate caused any part of the loss, is largely a question of fact.
• In the absence of an error in principle or a palpable and overriding error, a decision respecting mitigation is entitled to deference. 

The OCA determined that the lower court erred when it concluded that the employee failed to take reasonable steps to mitigate. Although it acknowledged that the lower court did not err in finding that the employee unreasonably delayed the start of her job search, the OCA found that the lower court did err when it held that in order to mitigate, a dismissed employee must begin searching for a lesser-paying job after spending a reasonable period of time attempting to find similar employment. The OCA held that an employee is obliged only to seek “comparable employment,” i.e., comparable in status, hours and remuneration at dismissal. 

The OCA also found that the lower court made a palpable and overriding error when it concluded that the employee aimed too high when she applied for vice-president positions. In arriving at this conclusion, the lower court rejected the employee’s claim that although she applied for positions that had more senior titles, the responsibilities were similar to  her previous employment. The OCA’s view was that the lower court placed too much emphasis on the titles, erroneously assuming that the positions were not comparable; this influenced the court to determine that the employee did not reasonably mitigate, but the record did not support this.

The OCA then found that the lower court erred in its assessment of whether the employee would have found comparable employment if she had taken reasonable steps. It noted that at the second stage of the test for mitigation, the lower court inferred that had the employee expanded the parameters of her job search, searched earlier, and applied for more positions, she would have had a significantly greater chance of obtaining a position. While the OCA agreed that in an appropriate case an employer could meet the second branch of the mitigation test by drawing a reasonable inference from proven facts, it found no evidence in this case to support the inference. It was the view of the OCA that the lower court did not ask or answer the proper question at the second stage of the mitigation test, i.e., whether the employer had proven that, if reasonable steps in mitigation had been taken by the employee, she would have found a comparable position during the reasonable notice period.

Bottom Line for Employers

Employers hoping to establish that a wrongfully dismissed employee’s reasonable notice period should be reduced because they failed to take reasonable steps to mitigate their damages are encouraged to pay close attention to the OCA’s decision in Lake v. La Presse, which clarifies that:

• The employee must not unreasonably delay the start of their job search.1
• The employee is obliged to seek only “comparable employment”  (i.e.,  status, hours and remuneration).  An employee is not obliged to begin searching for a lesser-paying job after spending a reasonable period attempting to find similar employment.   
• If the employee applies for a position with a title that is more senior than their previous title, it should not be assumed that they are  not taking reasonable steps to mitigate. The responsibilities of a position applied for should be the focus rather than its title. 
• It is only from proven facts that an employer and a court may draw a reasonable inference that had the employee expanded the parameters of their job search, searched earlier, and applied for more positions, they would have had a significantly greater chance of obtaining a comparable position.