A cautionary tale: why not to allege fraudulent mitigation activities without proof

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As a recent Ontario case involving a terminated dental hygienist demonstrates, employers that wish to put forth fraud allegations must provide incontrovertible evidence of falsification or be prepared to face the consequences of the court. Photo credit: Pexels/Anna Shvets

 

Gracias v. Dr. David Walt Dentistry, 2022 ONSC 2967 is a recent wrongful dismissal case regarding the duty to mitigate in the context of the COVID-19 pandemic. At the outset of the COVID-19 pandemic in March 2020, Ms. Gracias was dismissed without cause from her full-time employment as a dental hygienist after less than six months of employment. Six months later, Ms. Gracias mitigated with new employment.

In commencing her wrongful dismissal case, Ms. Gracias claimed seven months of reasonable notice, arguing that the termination provisions in her employment contract were unenforceable given the Waksdale rule (i.e., because it contracted out of the ESA) and that her intermittent part-time work entitled her to notice based on her total length of employment. Conversely, the employer argued the termination provisions of the contract were enforceable and any claim greater than the ESA, which she was paid, was barred. In the alternative the employer argued that the notice period was one month, but there were no damages because the employee received $16,000 in CERB during the notice period, and/or because of a failure to mitigate.

In addressing the employer’s mitigation fraud allegation, the court, while acknowledging “suspicious anomalies” in emails listed in the employee’s mitigation log, characterized the employer’s claim as a “wrathful attack” that failed on its merits. In doing so, the court held that it believed Ms. Gracias’ evidence that she did not falsify the documents and found that the employer’s evidence was “too flawed and incomplete” to draw the inference that she had done so and found no failure to mitigate.

When considering the employee’s wrongful dismissal claim the court confirmed that under the  Waksdale rule the proper method for determining whether a termination clause in an employment contract is enforceable. Meaning: if a provision denies any ESA minimum entitlement, then the whole of the termination clause is unenforceable, and a severability clause will not save it. Under this Ms. Gracias was awarded reasonable notice entitlements.  

In awarding such damages, the court considered the effect of COVID-19 and noted that it may justify a longer notice period because of the attendant difficulty finding other employment, however the harmful impact of the pandemic on the economy did not have a uniform effect on all job markets and it was a matter of evidence whether the pandemic harmed any particular job market. In this case the court preferred the employer’s evidence that there was a robust market for dental hygienists and found that the general downturn in the economy did not justify a longer notice period. 

In calculating reasonable notice damages the court refused Ms. Gracias’ claim that she was entitled to notice in connection with her intermittent and minimal part-time work. As such, Ms. Gracias’ entitlements were assessed to be in the range of one to three months. The higher end was awarded without a reduction for the noted fact Ms. Gracias had been looking for a job several weeks before dismissal. Had the employer not engaged in its hardball tactics this tidbit of information may have resulted in an award at the lower end of the noted range.  

In assessing whether the employer’s failure to provide a reference letter lengthened Ms. Gracias’ reasonable notice entitlements the court confirmed that an employer in law has no obligation to provide one, particularly where the parties have a “bitter and strained relationship”. 

Finally, after reviewing the different outcomes of judicial decisions in Canada that considered whether CERB should be deductible from wrongful dismissal damages, without reasons they chose to follow the line of cases supporting no deduction. As such, only the employee’s Employment Standards Act, 2000 (ESA) entitlements already paid were deducted from Ms. Gracias’ reasonable notice damages.   

Bottom Line for Employers

This decision is a cautionary tale that employers: 

  • that wish to put forth fraud allegations must provide incontrovertible evidence of falsification or face the consequences – even where “suspicious anomalies” in the evidence exists.
  • who do not comply with the Waksdale rule will be liable for their employees’ reasonable notice entitlements. 
  • CERB payments should not (perhaps – as the law is still unsettled) be deducted from the reasonable notice damages.

On the positive side, this decision supports the principles that: 

  • an employee’s minimal part-time employment may not be considered sufficiently continuous to be considered in calculating an employee’s reasonable notice entitlements.  
  • in calculating reasonable notice, specific evidence of the impact of the pandemic on the employee’s particular job market, rather than on the economy generally, is needed.
  • Employers have no obligation to assist a former employee by providing a reference letter, especially when their relationship is “strained and bitter.” 

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