Top 5 Ontario employment law decisions of 2022, part two

By Inna Koldorf

Law360 Canada (January 5, 2023, 9:23 AM EST) --
Inna Koldorf
Inna Koldorf
Much to the relief of many employers, in 2022 pandemic concerns slowly gave way to other workplace issues. This past year the Ontario Court of Appeal dominated the employment law sphere, issuing a number of significant decisions which changed the landscape for both employers and their employees. The following is the second half of this two-part article on the top five Ontario employment law decisions of 2022, the Court of Appeal edition (with one important lower court decision).

Mitigation of damages

In Lake v. La Presse 2022 ONCA 742 the Court of Appeal addressed employees’ obligation to mitigate their damages after termination of employment. A management employee’s employment was terminated by the employer without cause after five years of service. At the Superior Court of Justice, on a motion, the judge fixed the reasonable notice period at eight months but reduced the notice period by two months due to the employee’s failure to take reasonable steps to mitigate her damages.

Specifically, the judge found that the employee’s prospects of landing alternate employment were reduced because she waited too long to begin looking for work, that she “aimed too high” in her applications and ought to have applied for less senior roles as her unemployment persisted, and that she did not apply to many jobs. The trial judge further noted that although there was no evidence of the existence of other positions that the employee ought to have applied for, it was reasonable to assume that other positions existed.

The Court of Appeal found that the motion judge erred in finding that the employee failed to take reasonable steps to mitigate her damages. A terminated employee is obligated to seek a job which is comparable in status, hours and compensation to the position from which the employee was terminated. There is no obligation on a terminated employee to seek out a lesser paying job. The court also found that the employee was not “aiming too high” when she applied for certain positions. It is not the title of a position which must be comparable to the employee’s former position, but it is rather the duties that should be comparable. Lastly, the court reiterated that while a terminated employee has an obligation to mitigate her damages, the onus is on the employer to demonstrate that the employee failed to take reasonable steps to mitigate her damages and that had she done so, she would have been expected to secure comparable employment.

The employer in this case did not lead any evidence to show that the employee failed to mitigate her damages properly. As a result, it was not open to the motion judge to conclude that the employee failed to mitigate her damages. The court set aside the motion judge’s decision on the length of the reasonable notice period and replaced it with a judgment of eight months of reasonable notice.

Damages for bad faith in manner of dismissal

Damages for bad faith in the manner of dismissal gained steam in 2022. In Pohl v. Hudson’s Bay Company 2022 ONSC 5230, the plaintiff was terminated without cause after 28 years of service. He was a sales manager at the time. When his employment was terminated, the plaintiff was offered 40 weeks of notice and continued employment as an associate lead. The continued employment was offered with a number of conditions, including the requirement that the plaintiff relinquish his common law entitlement to reasonable notice, a demotion, a reduction in pay and a possible reduction in hours with no guarantee of minimum hours. The plaintiff declined to accept the offer and sued for wrongful dismissal.

The Ontario Superior Court of Justice found, among other things, that the plaintiff was entitled to 24 months of reasonable notice. In addition, the court awarded the plaintiff aggravated and punitive damages for what the court considered to be bad faith in the manner of dismissal. Specifically, the court awarded the plaintiff $45,000 in aggravated damages for four reasons. First, the employer walked the plaintiff out the door after the termination of his employment, which the court found to be insensitive. Second, the continued employment which was offered to the plaintiff was misleading. Third, the employer violated the Employment Standards Act (ESA) because it provided payment of the plaintiff’s statutory notice as a salary continuance, rather than as a lump sum as required by the ESA. Lastly, the employer did not issue the plaintiff’s record of employment within the time required by the Employment Insurance Act (EIA).

The court found that these actions on the employer’s part resulted in a violation of the employer’s duty of good faith and fair dealing at the time of termination, and that it was within the reasonable contemplation of the employer that its conduct would cause the plaintiff mental distress, resulting in the aggravated damages award. In addition, the court awarded the plaintiff $10,000 in punitive damages for the employer’s violation of the ESA and the EIA.

Aside from the offer of continued employment, the conduct of the employer in this case is conduct which many employers engage in as a matter of practice, making this decision an important one for all employers to be aware of.  

This is part two of a two-part series. Part one: Top 5 Ontario employment law decisions of 2022.

Inna Koldorf is a partner in KPMG Law LLP’s employment and labour law group, where she advises employers on labour, employment and human rights issues.

The opinions expressed are those of the author and do not reflect the views of the author’s firm, its clients, 
The Lawyer’s Daily, LexisNexis Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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