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Ontario Superior Court takes “trust” approach to mitigation at summary judgment

mitigatingdamagesSummary judgment has increasingly become a process used to litigate wrongful dismissal actions. It can be attractive as it allows the parties to avoid going through a more costly and time-consuming trial. However, the efficiency of this process raises other issues. Because parties can bring a summary judgment motion early on in the proceedings, a decision may be rendered prior to the expiry of the reasonable notice period at common law. This raises the question as to how to deal with the issue of mitigation.

A recent decision of the Ontario Superior Court, Paquette v. TeraGo Network Inc., addresses this issue. The case was heard on a summary judgment motion. The plaintiff, Mr. Paquette, was dismissed from his employment without cause on November 25, 2014, after approximately 14 years of service. The motion judge found that the reasonable notice period at common law was 17 months. The motion judge also determined that the plaintiff had made reasonable efforts to mitigate to the date of the motion, although he had been unsuccessful in obtaining any new employment.

With respect to the issue of the duty to mitigate where judgment is granted prior to the expiry of the reasonable notice period, the motion judge outlined the three approaches found in the case law:

  1. The contingency approach: Under this approach, the plaintiff’s damages are reduced by a contingency for re-employment.
  2. The trust and accounting approach: Under this approach, the plaintiff is awarded the full amount of the reasonable notice period award, but must account for any mitigation earnings made during the balance of the reasonable notice period.
  3. The partial summary judgment approach: Under this approach, the plaintiff is awarded partial summary judgment and the parties must return to court at the expiry of the reasonable notice period to deal with the outstanding issue of mitigation.

The motion judge held that the trust and accounting approach should be applied. In doing so, he explicitly rejected the partial summary judgment approach as being “cynical, patronizing, unfair, impractical and expensive”.

The trust and accounting approach provides little incentive to the former employees to actively mitigate their damages. As was noted in a previous decision, Russo v. Kerr, this approach provides a theoretical duty to mitigate, but on a practical level the plaintiff will have no incentive to earn any income during the balance of the reasonable notice period. Furthermore, under this approach it will be extremely difficult for an employer to prove the employee failed to mitigate, or that the employee had mitigation earnings that he or she failed to disclose. If courts continue to adopt this approach, it will make summary judgment a much less favourable route for employers, especially in cases of employees with entitlement to long notice periods at common law.

Employers faced with a decision awarding damages on this trust and accounting basis may consider entering into a written agreement with the plaintiff, providing that should the plaintiff secure alternate employment during the balance of the awarded reasonable notice period the plaintiff would be entitled to keep one half (or some portion) of the monies that would otherwise be refundable to the employer. This would provide incentive for the employee to mitigate, securing a windfall for them if they do, and simultaneously saving the employer at least some portion of the damages.

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Stringer LLP

Employment and Labour lawyers at Stringer LLP
Stringer LLP is a leader in Canadian HR law. For over 45 years, they have taken a client-centered approach to responsive service, representing employers with labour relations and employment problems. Their firm’s practice covers a broad spectrum of HR law, including employment law, occupational health & safety, labour relations and arbitration, human rights, workers’ compensation and pay equity, as well as issues under the Accessibility for Ontarians with Disabilities Act. They also provide training, seminars and conferences on the above topics. Read more
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