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By Tony Poland, LegalMatters Staff • A recent court judgment offers “some real practical advice” on the principles of mitigation, says Toronto employment lawyer Ellen Low.
In Byrd v Welcome Home Children’s Residence Inc., the Ontario Superior Court of Justice, Small Claims Court, offered “a fully reasoned, well thought out” analysis on how the mitigation process should apply, says Low, principal of Ellen Low & Co.
“This is a very helpful judgment. Deputy Judge Caroline Kelly took the time to think it through and it gives us, as practitioners, some added guidance,” she tells LegalMattersCanada.ca. “It examines the question of at what point does a side hustle become your main hustle.”
The Court was told Lesley Byrd was seeking more than $25,000 in damages after alleging she was constructively dismissed from her job at the Welcome Home Children’s Residence in 2022.
Byrd started at the care home in April 2018 and was considered a “valued employee,” according to the judgment.
In May 2020 she told her employers her husband had been transferred to Europe and she was accompanying him and their four children overseas.
Worked remotely from Belgium
The Court heard Byrd worked out a deal with her employer so she could work remotely from Belgium, although there was no written employment agreement specifying details of the arrangement and the right to recall her to in-person work was never established.
“Bear in mind that just because there is no written contract of employment, doesn’t mean there’s no contract of employment,” explains Low, who was not involved in the case but comments generally. “Every employee and employer in Ontario is governed by implied rights based on different regulations, such as the Human Rights Code, the Employment Standards Act, the Workplace Safety and Insurance Board and the Occupational Health and Safety Act.
“Even if there is no written contract, it doesn’t mean one doesn’t exist,” she adds. “It just means in the absence of a written agreement specifying the terms of employment, the parties are going to have a dispute over exactly what they agreed upon. Where there is no contract to specifically dispose of any implied common-law obligation then you are potentially into a fight over pretty much everything.”
About a year after relocating to Belgium, Byrd took a second job. The Court heard that although she didn’t tell her employer about the new position, there was nothing in their agreement that precluded her from taking on extra work.
A short time later, Byrd was informed the care home intended to hire an on-site residential program manager and that her position would change. In January 2022, Byrd was told she was approved to work no more than 15 hours a week, the Court heard. Later in the month, the majority of her responsibilities were assigned to the new manager and another person.
Disagreed on available options
According to the judgment, “there is disagreement over the options that were then available” to Byrd.
“In a letter dated March 2, 2022, counsel for the defendant stated, ‘It is an expectation of Ms. Byrd’s employment that she supervises employees in-person,’” the judgment states.
Byrd resigned at the end of April 2022, alleging she was constructively dismissed and was owed a notice period of 6.5 months.
Her employer countered by arguing that even if Byrd “was constructively dismissed, she is not owed any damages given the notice of her dismissal and her damages were mitigated by her continuation in her [second] job.
Low says the case examines the question of at what point is income earned from a second job “no longer considered supplementary and not subject to mitigation, but it’s now in fact a substitution for employment?”
Byrd relied on the Ontario Court of Appeal decision in Brake v PJ-M2R Restaurant Inc., arguing “but for her wrongful termination, she would have continued to work two jobs and there should be no deduction for monies earned during the notice period from her [additional] employment,” the judgment states.
“Brake was helpful for a couple of different reasons because it examines what threshold or at what point is a position reasonably similar such that the employer can rely upon it to start mitigating damages,” Low says.
However, the appellant court had left “for another day the question as to when supplementary employment income rises to a level that it [or a portion of it] should be considered as a substitute for the amounts that would have been earned under the original contract and, accordingly, be treated as deductible mitigation income.”
Second job not intended to be permanent
That decision was left up to the judge in Byrd v Welcome Home Children’s Residence Inc., who found the second job would end when she left Belgium and was not intended to be permanent. However, the Court ruled that the employer was entitled to deduct 30 per cent of Byrd’s wages earned from her second job when calculating her severance.
Low says the duty to mitigate is straightforward but there are nuances. Mitigation is the legal obligation of an employee to take reasonable steps to reduce financial losses after being dismissed, she says.
“In this case, the former employer seemed to allege that Byrd’s extra job should have been considered comparable employment such that they should be able get credit for the wages she earned,” Low says. “Byrd raised the question of when does a side hustle become a reasonably secure alternative employment such that the employer should start to get credit for mitigation damages.”
She says the issue of mitigation and outside employment can get complicated because “if you are doing your job and you are not competing with your own company and you are not violating any of your contractual terms or codes of conduct, you are, for the most part, free to do what you want in your off hours.”
“If you want to drive for Uber in your spare time after your full-time job, go for it,” Low says. “This case essentially deals with the question of once you are fired from your main job, can you pick up enough hours with Uber to make that start to impact mitigation damages because it is now effectively your new full-time job.
“However, the Court of Appeal has already stated it is not going to be a bright line test,” she adds. “There is no clear delineation about at what point a job might change from supplementary income to a substitute for the former employer’s income.”
Duty to mitigate remains
Even in cases like Byrd, where she was out of the country when she left her employment, an employee would still have a duty to mitigate, Low advises.
“If you are not able to mitigate your damages, then you may not necessarily be paid the full complement of any sort of reasonable common-law notice period,” she says. “It is not reasonable to say you are out of the country and are unable to look for other work. Especially now when we work in an online environment.”
Low says it is not unusual for employers and employees to discount the importance of mitigation.
“Some just write off mitigation like it will never be a problem,” she says. “In my experience, it is always going to be a problem. Even in a relatively uncontested common-law notice period assessment, the parties will usually then still fight over mitigation.”
Giving short shrift to mitigation is a common mistake, says Low.
“Plaintiffs will say they don’t have to worry about it because the employer has to prove that they didn’t do something. And that’s a pretty high threshold, she says. “Conversely, the employer believes they will have a pretty easy time of pointing out all opportunities that the employee could have, or should have applied to.
“My takeaway is don’t discount mitigation and don’t assume that all income earned post termination is going to be treated differently. Seek legal advice.”
