Reasonable Notice Period and the Duty to Mitigate Damages
29 Oct 2015
It is well known that a wrongfully terminated employee deserves an adequate notice period prior to termination or pay in lieu of notice.
The length of the reasonable notice period is determined by an employee’s length of service, position or title, age and ability to find new or alternate employment. The employee also has a legal duty to mitigate his damages. This means that the employee cannot simply "wait out" his or her notice period to collect the maximum award that was available under the law. They must go out and look for new or alternative employment. The employer’s common law obligations either under a proper notice period or pay in lieu thereof will be reduced if the employee obtains comparable new or alternative employment during the notice period.
The Ontario Superior Court case of Markoulakis v. SNC-Lavalin Inc., 2015 ONSC 1081 (CanLII), was a summary judgment matter for wrongful termination (also called wrongful dismissal). The issue before the court was whether or not the plaintiff employee should adjourn his summary judgment matter until the end of the notice period being claimed by him. The defendant employer’s concern was that to do otherwise would have the "practical effect" of removing the plaintiff employee’s incentive to mitigate his damages if he was to obtain pay in lieu of notice before the notice period was complete.
The plaintiff employee, Eftihios Markoulakis (hereinafter "Mr. Markoulakis") was sixty-five (65) years old when his employer, SNC-Lavalin Inc. (hereinafter "SNC-Lavalin"), wrongfully terminated him from his position as a Senior Civil Engineer after more than forty years with the company. They had approached him a month prior and advised him verbally of their intentions; however, they agreed to pay him an amount equal to thirty-four (34) weeks notice.
Mr. Markoulakis made extensive mitigation efforts. However, he could not find alternative employment and sued SNC-Lavalin for wrongful termination. The court confirmed that despite his age, and his more than forty (40) years of service with SNC-Lavalin, Mr. Markoulakis was not completely incapable of finding another job, no matter how unlikely or daunting the task may seem.
The Court’s Analysis
The Court looked to Cronk v. Canadian General Insurance Co. (1995), 25 O.R. (3d) 505,  O.J. No. 2751 (C.A.) and Bullen v. Protor & Redern Ltd., 1996 CanLII 8135, 47 C.P.C. (3d) 280 (Ont. S.C.), two cases that dealt with judgments being rendered prior to the expiry of the notice period to point out that despite an early judgement the plaintiff still maintained an obligation to mitigate damages. However, the issue SNC-Lavalin raised was not whether the obligation remains, but whether the obligation is effective when an early lump sum judgment is awarded to a former employee when they still have a duty to mitigate their damages.
The court then shifted its focus to the manner in which damages are to be awarded prior to the expiry of the term of the notice period. Three distinct methods were brought forward as set out in the jurisprudence. The first approach that the court considered was called the "trust approach" which comprised of a lump sum award and the setting up of a trust mechanism to collect any mitigating income in favour of a defendant employer. The second approach was the "partial summary judgement approach", which requires parties to return to court at the conclusion of the notice period to assess mitigation efforts. And finally, the third approach was called the "contingency approach", wherein the damages awarded are to be reduced by the possibility of re-employment.
Both parties in the case at hand rejected the contingency approach. Mr. Markoulakis favoured the trust approach. He wanted the lump sum, and then wanted to remit any further earnings, if they were to come, in trust for SNC-Lavalin.
SNC-Lavalin rejected the trust approach. They explained that the approach is not fair and would cost more of the court’s resources in the long run. SNC-Lavalin highlighted two distinct reasons. The fact that a "maximum" amount is awarded would likely result in further litigation with SNC-Lavalin returning to recover any overpayment or to determine any obligations to mitigate that weren’t met. Further, in accordance with Russo v. Kerr, 2010 ONSC 6053, 326 D.L.R. (4th) 341, such a lump sum award would only serve to undermine Mr. Markoulakis incentive to mitigate damages, it would effectively create a rather imposing "motivational problem" when it came to Mr. Markoulakis locating another source of income. This would make it unduly difficult to examine the veritable reasonableness of any attempts to find new employment.
SNC-Lavalin rejected all three approaches enumerated by the court, and offered its own. SNC-Lavalin suggested that the court wait until the damages have fully "crystalized". Once the total amount is clear, it can be offset against any mitigating efforts, and the remainder may be awarded to Mr. Markoulakis. SNC-Lavalin argued that an early award would be unfair; as it would require them to pay an amount they "may" be responsible for as opposed to paying an amount for which they are responsible. In other areas of the law damages are assessed in totality either by direct calculation or via the analysis of an expert prior to an order to pay.
The court then moved to consider the amount of the award, and the method by which such an award should be released. In doing so the court confirmed that in accordance with the common law (Bardal v. Globe & Mail Ltd.,  O.J. No. 149, 24 D.L.R. (2d) 140 (H.C.J.) and Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469, 282 O.A.C. 134) the approach it must use in determining the amount of damages is to be a "holistic" one. This means that the court will consider many different factors, weighing them against each other given the unique complexity of the specifics at hand. Amongst the factors the court considered were Mr. Markoulakis’ term of employment, position, salary, age, as well as his ability to find new employment. Or more specifically, as the court sets it out, they are to consider "(1) the character of employment, (2) the length of service, (3) the age of the employee, (4) the availability of similar employment having regard to the experience, training, and qualifications of the employee, and (5) any other relevant circumstances" (Bardal, at para. 21; Machtinger v. HOJ Industries Ltd.,  1 S.C.R. 986,  S.C.J. No. 41 at para. 22).
Mr. Markoulakis made clear that the facts favoured a lengthier notice period because of his loyalty to the company, his age presenting a barrier for future employment, the job market being scarce, and that he was not offered career counselling by the SNC-Lavalin. SNC-Lavalin made clear that they offered Mr. Markoulakis a similar position that required relocation, Mr. Markoulakis has gained much experience and expertise making him a sought after acquisition for many companies, and that the fact that Mr. Markoulakis applied for thirty-three (33) positions is proof that there are sufficient positions available.
Having considered the submissions of both parties as well as the facts at hand the court concluded that there are special circumstances at play in this case. Mr. Markoulis was sixty-five (65) years old and had served more than forty (40) years with SNC-Lavalin and this, in the court’s opinion, was enough to justify an award of a notice period longer than the twenty-four (24) month maximum. However, the court did not stretch the notice period to accommodate Mr. Markoulakis’ requested thirty (30) months, instead awarding twenty-seven (27) months in keeping with the length of other notice periods in similar cases as well as SNC-Lavalin’s verbal notice one month prior to firing.
Furthermore, and perhaps more importantly, the court ruled that the payments due to Mr. Markoulakis should not be awarded in lump sum. Rather, he should be paid on a month-to-month basis inclusive of any and all deductions from his employment or business earnings. The court went on to hold that in using this method of compensation "the employee’s right to a determination of the appropriate period of reasonable notice has been satisfied and the employer’s right to challenge the employee’s mitigation efforts has been preserved".
When you’re fired it is important to understand that it is your right to get a reasonable notice period or payment in lieu of notice. There are many factors that the court is willing to consider and, as such, every case will be unique. Your age, inability to relocate, position, even the current state of the job market may have an impact on calculating a reasonable notice period.
The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.