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BC Court of Appeal Clarifies Treatment of Mitigation Earnings and Extended Notice for Health Reasons

Two primary considerations in any wrongful dismissal action is the period of reasonable notice an employee is entitled to and how to treat income earned by the employee during the notice period.   These issues can be more complicated when an employee suffers from health issues and held more than one job at the time of dismissal. 

These were the issues faced by the British Columbia Court of Appeal recently in Pakozdi v. B & B Heavy Civil Construction Ltd.   The plaintiff in this case was originally engaged as a consultant providing construction bid estimating services to the defendant company.   In January 2014 the plaintiff became an employee of the company and, with his employer’s consent, continued to provide consulting services to other companies.  The plaintiff was dismissed in January 2015 with two weeks’ notice.  No cause was alleged.  At the time of trial the plaintiff was fifty-five (55) years old.

After finding that the parties had not agreed to a five year fixed term contract, the trial judge assessed the period of reasonable notice at five (5) months, having regard to the factors normally used by the courts to assess notice (experience, age, length of service).  The plaintiff asserted that he was particularly vulnerable at the time of his dismissal due to health reasons and the trial judge extended the period of notice to eight (8) months to address this “vulnerability”. The trial judge justified the extension by finding that these health issues would make it more difficult for the plaintiff to obtain new employment.

During the assessed notice period, the plaintiff continued to provide consulting services to the clients he had during his employment with B & B.   A comparison of the hours he worked for these clients while he was employed and then during the notice period demonstrated a substantial increase in revenue during the notice period - in some months more than double what he earned in consulting fees while employed by B & B.  As such, the Company took the position that the plaintiff had fully mitigated his damages.  The trial judge disagreed and found that mitigation income earned through a second job an employee held prior to dismissal was to be entirely excluded from any calculation of damages.

On appeal, the Court overturned both aspects of the trial judge’s decision.   On the issue of reasonable notice, the Court found that while five (5) months was on the “high side” it was still within a reasonable range of notice based on the jurisprudence and the court was not prepared to interfere with that finding.  On the issue of the three (3) month extension of the notice period, the Court held that while there may be circumstances where health issues were an appropriate consideration in assessing reasonable notice, the evidence before the trial judge was that the plaintiff was able to work throughout his notice period as a consultant and as such the extension of notice was found not to reasonable in the circumstances.

On the issue of the mitigation income, the court found that the trial judge had erred in her interpretation of the guiding principles on the treatment of earnings from a second position held prior to dismissal.  The Court of Appeal clarified that it is not all income from the second role that should be excluded but only the income that was already being earned by the employee prior to the termination of employment.  Based on this finding, the Court of Appeal assessed approximately 30K as supplemental income to be deducted from the five (5) month notice damage assessment.

Navigating wrongful dismissal issues can be challenging, particularly when dealing with shorter-service employees who may be older or in a more senior role.  The use of a properly drafted employment agreement can take the guess work out of assessing liability when an employee is dismissed (click here to listen to CCP’s podcast on the benefits of using employment agreements.   The team at CCP can assist employers with all the issues that arise when dismissing an employee.  Click here for a list of team members who can answer your pressing dismissal issues.

Click here to access CCP podcasts on important workplace issues and developments in labour and employment law.



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