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Court of Appeal helps employees receive more for wrongful dismissal

A fundamental principle of wrongful dismissal damages holds that damages compensate employees for their actual economic loss. As an employee, if you win a wrongful dismissal case, you are entitled to receive severance pay for a notice period determined by the court. However, this award only applies to income you lost during that notice period.

If, for example, the court sets a 20-month notice period for your case, then you would be entitled to severance pay for 20 months. If you found new employment after 10 months, however, then you would only receive compensation for lost income from the first 10 months – not the full 20 months.

But what happens if you held a second job at the time of your dismissal? And what happens if, after your dismissal, the only employment you were able to find was at a significantly lower pay grade? How do such factors influence the pay out from your former employer?

A recent Ontario Court of Appeal decision has set some landmark guidelines surrounding such questions.

McDonald’s case

Esther Brake was a McDonald’s employee for 25 years. While working as a manager at an Ottawa location, McDonald’s dismissed her without any notice or any of her statutory minimum payments upon dismissal.

McDonald’s reviewed her work very favourably for many years. Suddenly, Ms. Brake received a series of critical performance evaluations. McDonald’s management offered her a choice: demotion – under which she would report to employees she had trained and supervised – or dismissal. Ms. Brake refused to be demoted and walked out, never to return.

While working at McDonald’s, Ms. Brake worked part-time at Sobeys. She found employment at Home Depot after McDonald’s dismissed her. Ms. Brake brought action against McDonald’s for wrongful dismissal.

Mitigating factors

At trial, the Ontario Superior Court held that Ms. Brake was wrongfully dismissed and awarded her $104,500 for 20 months of termination and severance pay. Ms. Brake was also awarded 20 months of wrongful dismissal damages.

The court did not deem Ms. Brake’s income from either her Sobey’s or Home Depot jobs to be mitigation earnings. In other words, none of her income from these jobs was deducted from McDonald’s court-ordered severance pay. McDonald’s appealed the decision.

Ontario Court of Appeal weighs in

The Ontario Court of Appeal upheld the lower court’s decision.

The court determined that McDonald’s could not deduct Ms. Brake’s Home Depot income from their severance payments. The court found that income from the new position does not have to be deducted if an employee’s new work after a wrongful dismissal pays significantly less than the position they held when wrongfully dismissed.

Similarly, McDonald’s was not able to deduct any income from Ms. Brake’s second job at Sobey’s. Because McDonald’s had permitted Ms. Brake to work at Sobey’s while working full-time at McDonald’s, the court determined that McDonald’s could not deduct this income from the damage award.

This Court of Appeal decision puts employees in a stronger position if they have faced wrongful termination or constructive dismissal. It helps them to receive the full pay-out package they deserve.