In the assessment of damages for breach of an indefinite employment agreement, courts recognize that the dismissed employee has a duty to mitigate the loss arising from the termination. Typically, as the plaintiff, the dismissed employee would lead evidence respecting the loss he or she suffered by reason of the termination, and the defendant (the employer) would argue that the plaintiff could reasonably have avoided some or all part of the loss claimed. In short, the amount of damages can depend on whether the dismissed employee has taken reasonable steps to avoid the losses (see Red Deer College v Michaels, 1975 CanLII 15 (SCC) at p. 331).

In general, all income earned by the dismissed employee during the notice period will be considered mitigation income. However, income from the dismissed employee’s side job will not be considered mitigation income as the income would have been earned regardless of the dismissal.

The analysis becomes more complicated when the dismissed employee earns more income from the side job after the dismissal.

In Pakozdi v B & B Heavy Civil Construction Ltd., 2018 BCCA 23, the plaintiff made increased earnings from his side business after the termination. In this case, the court stated, at para 46:

It is not all income from the second job that is excluded from the damage calculation, but rather income from the second job that could have been earned had the employment from the first job continued. In other words, the question is whether the new income is replacement income regardless of the source of the income or a continuation of supplementary income being earned prior to the dismissal.

Based on the foregoing principle, the Court characterized approximately $30,000 of the post-termination income from the side business as replacement income and reduced the damage award.

Similarly, in Coutts v British Columbia, 2000 BCCA 565, the plaintiff increased his private business from a part-time endeavour to a full-time operation after the dismissal. In the result, his income from the side business also increased from approximately $20,000 to $55,500. The court considered that the plaintiff mitigated the damages in the amount of approximately $35,500.

If you have any questions related to your employment, please contact Osuji & Smith Calgary’s Employment Lawyers.

Author: Justin Kwon