Tuesday, June 10, 2014

Does a Plaintiff Need to Prove He Didn't Get a New Job?

As promised, here's my commentary on Garcia v. 1162540, a decision from the Divisional Court last year.

Mr. Garcia worked for 12 years at Venice Fitness, and submitted bi-weekly invoices.  After the defendant failed to pay an invoice, he took $2,700 cash from the employer and stopped reporting for work.  The defendant called the police, and Garcia returned the cash in response for a promise to pay the invoice.  The invoice wasn't paid, nor was a subsequent invoice.

Garcia sued the corporation as well as his boss, Jack Eghbali, for constructive dismissal.  Deputy Judge Prattas found that failing to pay his invoice constituted a constructive dismissal, and awarded $25,000 against both defendants, jointly and severally, including the two unpaid invoices ($3,524.33) and the balance in wrongful dismissal damages.

The defendants appealed on multiple grounds.

Firstly, they challenged the finding of personal liability primarily on the basis that it wasn't raised until closing submissions.  It's an interesting issue, but Justice Wilton-Siegel was almost certainly correct to allow that ground of appeal on that basis.

Secondly, they challenged the finding of constructive dismissal.  Deputy Judge Prattas had concluded that Eghbali "never had any intention of paying the plaintiff any money" (not believing his explanation at trial, an assessment of credibility well within the purview of the trial judge) and that the withholding of pay constituted a fundamental breach of the employment contract.  Justice Wilton-Siegel found that this was warranted on the evidence.  (There was some question as to whether or not Deputy Judge Prattas was entitled to consider post-resignation events.  Justice Wilton-Siegel appears to have been doubtful of that, but considered the pre-resignation events to be more than sufficient.)

Thirdly, they challenged the Deputy Judge's refusal to give weight to two written statements admitted under the Small Claims Court Rules, by Garcia's co-workers.  The statements were very general in nature, though, and didn't necessarily lead to the conclusion urged by the defendants, according to Justice Wilton-Siegel.  Trial judges are entitled to significant deference in how much weight they give to the evidence.

The fourth ground of appeal is far more bizarre and cerebral, that the plaintiff had failed to lead evidence of damages.  The plaintiff did not testify that he had been unemployed for any particular period of time, and this was not queried on cross-examination.  Nor was he questioned about his efforts to mitigate his losses by obtaining replacement employment.  In any event, failure to mitigate wasn't pleaded.  So, despite the complete absence of any evidence as to how long the plaintiff was actually out of work, or what efforts he took to obtain new work, the Deputy Judge awarded significant wrongful dismissal damages.

The defendants argued that this was an error, that "the plaintiff had the onus of proving damages, even though the defendant had the onus of demonstrating an absence of mitigation."  Justice Wilton-Siegel accepted this argument, and therefore overturned the entire wrongful dismissal damage award.  (It appears that the judgment was not appealed to the extent of the invoices.)

For costs, Justice Wilton-Siegel reversed the plaintiff's award of costs at trial ($3,500) and awarded the defendants $3,500 in trial costs and another $3,500 as costs of the appeal.


The only particularly striking ground of appeal is the fourth, and I disagree with Justice Wilton-Siegel's analysis on the point.  (I say this with the utmost respect.  I have had the pleasure of appearing before Justice Wilton-Siegel, and found him to be a very sharp and detail-oriented judge.)

First, it must be understood that a plaintiff suffering a loss generally has an obligation to take reasonable steps to 'mitigate' the loss, and that if and when you start receiving replacement income, that income gets deducted on a dollar-for-dollar basis from the damage award.

However, the burden of proof is upon the employer to establish failure to mitigate.  So the failure of a plaintiff to lead evidence relating to mitigation is not necessarily a problem.

It is true, of course, that the onus is upon the plaintiff to lead proof of damages.  So there's a logic to Justice Wilton-Siegel's reasoning, and there are others who agree with him.  (See, for example, Sean Bawden's "Labour Pains" blog.)  But the nuance in this case is in what a wrongfully dismissed employee must do to 'prove damages'.  And that, simply, is answered by an examination of what wrongful dismissal damages are.

An employee is contractually entitled to notice of dismissal, and if dismissed without notice, an employee loses the value of his full remuneration package over the full notice period.  To prove damages, an employee need only prove that he was dismissed without adequate notice, and what he would have received over the reasonable notice period.

Wrongful dismissal damages are ordinarily to be assessed as at the point of breach.  They do not accrue over time; from the moment of the dismissal, the dismissed employee has a cause of action and is entitled to seek full pay in lieu of notice, and may be able to obtain summary judgment to that effect as quickly as he can get into court, as in Bernier v. Nygard.  It's pretty simple, really:  The employer was supposed to continue to pay me, and didn't.  So I've suffered a loss.  That's not to say that the 'point of breach' assessment is the end of the analysis - for example, those damages are subject to mitigation, as noted above...which was addressed in Bernier by impressing damages with a trust.

By extending the obligation to prove damages to establishing that replacement income wasn't earned, Justice Wilton-Siegel created an additional requirement to prove damages which is indistinguishable from proving absence of mitigation (for which, as was conceded, the onus is upon the defendant).  If I'm entitled to 12 months' notice and earn $5,000 per month, then when I'm dismissed without notice, at a glance I've suffered losses to the tune of $60,000.  If you take Justice Wilton-Siegel's approach and say that my losses require the absence of replacement earnings, then those losses will be impossible to prove until the full reasonable notice period runs its course, and more importantly that very question is not at all different from the question of whether or not I've earned mitigation earnings.

The question of onus relating to proving mitigation earnings actually arises pretty infrequently compared to the onus for failure to mitigate, but the answer is the same.  Justice Wilton-Siegel referred to the Supreme Court's decision in Michaels v. Red Deer College, a 1975 case still considered to be the authority for mitigation in employment law; immediately after the cited passage, the Court quoted Williston on Contracts:
It seems to be the generally accepted rule that the burden of proof is upon the defendant to show that the plaintiff either found, or, by the exercise of proper industry in the search, could have procured other employment of an approximately similar kind reasonably adapted to his abilities, and that in the absence of such proof the plaintiff is entitled to recover the salary fixed by the contract.

In other words, by requiring the plaintiff to lead evidence of the absence of further employment earnings, Justice Wilton-Siegel improperly reversed the onus.


Just a brief note on costs: it isn't clear to me that the reversal of trial costs is appropriate, even given their success on the wrongful dismissal damages.  Small Claims Court has some relatively inflexible rule about costs, and where the plaintiff obtains judgment at all (as in for the invoices, which weren't challenged on appeal), the only way the defendant can obtain costs is if it made an offer to settle which was at least as favourable to the plaintiff.  In the absence of such an offer (which wasn't alluded to in Justice Wilton-Siegel's decision), there's simply no basis in the Small Claims Court Rules for awarding trial costs to the employer in this case.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

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