Granting Judgment before the Conclusion of the Reasonable Notice Period

The increasing use of summary judgment motions to decide straightforward wrongful dismissal actions has resulted in it now being commonplace for a court to grant judgment in a wrongful dismissal action before the expiration of the dismissed employee’s reasonable notice period. This raises the question of how the court should take into account the plaintiff’s duty to mitigate his or her damages during the balance of the notice period after judgment.

This question was recently considered by Justice Perell in Paquette v TeraGo Networks Inc., 2015 ONSC 4189. The plaintiff was a 49-year-old lead systems architect who had worked for the company for 14.5 years when he was dismissed from his employment without cause. He brought a motion for summary judgment and was awarded a reasonable notice period of 17 months.

Judgment was granted less than 7 months after the plaintiff had been dismissed.

Justice Perell wrote at paragraph 48 that when judgment is granted before the expiration of the reasonable notice period the courts have employed three approaches to deal with the plaintiff’s own going duty to mitigate during the balance of the notice period:

1. The Contingency Approach – The employee’s damages are discounted by a contingency for re-employment during the balance of the notice period. See Russo v. Kerr, 2010 ONSC 6053 (CanLII); Smith v. Pacific National Exhibition (1991), 1991 CanLII 2366 (BC SC), 34 C.C.E.L. 64 (B.C.S.C.).

2. The Trust and Accounting Approach – The employee is granted judgment but a trust in favour of the employer is impressed on the judgment funds for the balance of the notice period requiring the employee to account for any mitigatory earnings. See: Thomson v. Bechel Canadian Ltd. (1983), 3 C.C.E.L. 16 (Ont. H.C.J.) at para. 23; Bullen v. Proctor & Redfern Ltd., supra; Correa v. Dow Jones Markets Canada Inc. (1997), 1997 CanLII 12268 (ON SC), 35 O.R. (3d) 126 (Gen. Div.); Adjemian v. Brock Cro48mpton North America, supra; Di Tomaso v. Crown Metal Packaging Canada LP, supra. In Correa, the Court awarded a lump sum payment for the maximum notice period, which included damages for the unexpired period of reasonable notice and the plaintiff was ordered to account to the defendant for any earnings during the notice period.

3. The Partial Summary Judgment Approach – The employee is granted a partial summary judgment and the parties return to court during and or at the end of the notice period for further payments subject to the duty to mitigate. See Markoulakis v. SNC-Lavalin Inc., supra.

Justice Perell decided to employ the Trust and Accounting Approach finding that the Partial Summary Judgment Approach was cynical, patronizing, impractical and expensive. He wrote:

[67] TeraGo shall forthwith pay Mr. Paquette damages of $163,267.90 less any taxes or funds it is statutorily obliged to hold back or remit.

[68] Mr. Paquette may utilize the funds as he sees fit, but he must account for any mitigatory earnings for the balance of the reasonable notice period. It is the mitigatory earnings not the damages award upon which there is a court imposed constructive trust in favour of TeraGo.

[69] I reject the Partial Summary Judgment Approach as cynical, patronizing, unfair, impractical, and expensive.

[70] Mr. Paquette has had no employment income since November 2014. He has made diligent, albeit unsuccessful, efforts to mitigate, and it is cynical to assume that with many years of future employment both possible and needed, that he will sit on his hands and wait out the reasonable notice period rather than getting on with his career. If he earns mitigatory income, he will have to simply account for it or be liable for breach of trust. [emphasis added].

It has always been extremely difficult for an employer to establish that an employee has failed to mitigate his or her damages. The onus is on the employer to prove not only that the employee failed to take reasonable steps to find that comparable position but that the employee would likely have found a comparable position had those reasonable steps been taken. However, the Trust and Account Approach takes this concept to the extreme, trusting the employee to take reasonable steps to find new employment and to report any mitigation earned. It appears to reflect the recent emphasis by the courts on judicial efficiency. Time will tell whether it becomes the standard approach employed in Ontario.