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The case of Okano v. Cathay Pacific Airways (2022 BCSC 881) confirms that the negative impact of COVID-19 on certain industries does not alter the courts’ expectations on what is reasonable (the “how” of) when employees mitigate their damages – in this case, the airline industry.
In Okano the employee sought wrongful dismissal damages as well as repayment of lost wages due to her concessions to reduce her salary during the height of the pandemic.
Until this case, it was unknown whether there would be a curve ball for employers resulting from the fact that certain industries were negatively impacted by the public orders and loss of business arising from the pandemic in assessing the reasonableness of employees’ actions in mitigating. Such as when they commence a new career outside of the one they spent their entire work lives in.
What is an employee’s duty to mitigate?
This duty refers to the common law principle that requires employees who are dismissed from their employment to minimize their losses or wrongful dismissal damages by making reasonable efforts during their reasonable notice period to find a new job.
Generally, if an employee fails to mitigate their wrongful dismissal damages, while the duration of the reasonable notice period remains the same, their employer can argue for a reduction to it – an award for damages in relation to those damages that could have been avoided through reasonable efforts.
The employer bears the burden of proving that an employee failed to mitigate and/or took inadequate steps to mitigate their damages by not acting reasonably. Where an employer proves either, courts may either: (a) find that the employee is not entitled to any damages; or (b) reduce the employee’s damages based on the estimated period in which the employee failed to mitigate. This can include determining the date by which the employee should have secured alternative employment.
Reasonable efforts do not include:
- An employee needing to apply for and accept just any other job. The employee is only required to apply for jobs that are comparable to that from which they were terminated in relation to their status, hours, and remuneration; the employee is not required or expected to accept work that is incomparable to their previous position.
- An employee needing to start the job search immediately upon the termination of their employment. Courts have long recognized that employees need time to recover from the shock of being terminated from their employment.
- An employee inadequately mitigating by accepting alternative employment at a lower income when employment in a higher paying position could have been secured.
- An employee focusing their job search efforts more on personal preferences and objectives, such as pursuing a new career, than what is “reasonable”.
- Deducting from an employee’s ESA termination pay and/or severance pay entitlements if an employee commences new employment during the same.
Okano:
In Okano the employee, Ms. Okano, a 61-year-old manager with nearly 35 years of service, was assessed as being entitled to 24 months of reasonable notice, which was reduced by 3 months AND a 15 per cent discount on the amount owing from the date of the hearing to the end of the 21-month notice given the Court’s assessment that: “there is a real and substantial possibility that she will find a job commensurate with her qualifications and experience at some point during the balance of the notice period.”
In making its decision on the applicable wrongful dismissal damages, the Court upheld the amendments to Ms. Okano’s employment contract and held that while it was reasonable for Ms. Okano not to look for a job during her working notice period as she was assisting her employer, it was unreasonable for her to not apply for airline jobs. In the Court’s assessment: “it was incumbent upon the plaintiff to explore available positions in the very industry in which she had spent her entire working life.”
Take aways:
Employees who agree to reductions to their compensation packages as part of workplace parties’ efforts to continue the employment relationship and/or the employer’s operations during the pandemic cannot resile from them to claim an entitlement to reimbursement of them post-employment.
Employees focusing their job search efforts on personal preferences and objectives, including during a pandemic, such as pursuing a new career in real estate when their entire career was in sales, do not discharge their duty to mitigate and will have their notice entitlements reduced going backwards and forwards.
Sheryl L. Johnson brings a proactive, creative, and vibrant attitude to her labour, employment and human resource law practice. Sheryl has extensive experience in representing clients in both the provincial and federal jurisdictions on all matters relating to employment and labour law, including for example construction labour law, employment related civil wrongful dismissal, human rights, and labour board litigation; privacy, governance, statutory and regulatory compliance, and executive compensation matters; as well as conducting workplace training and workplace investigations. Sheryl is also an avid educator and writer, including authoring a bi-weekly business column in The Niagara Independent and the text: Sexual Harassment in Canada: A Guide for Understanding and Prevention. Sheryl enjoys in her free time giving back to the Niagara community. She is a member of the WIN Council, Chair of the Board of Directors for the Niagara Jazz Festival, Vice-President of the Board of Directors for the YWCA Niagara Region, Secretary of Big Brothers Big Sisters of Niagara Falls Board of Directors, a board member of the Niagara Home Builders Association, and a board member of the Women in Construction group of the Niagara Construction Association.
