Employers need clear evidence to establish just cause and post-termination earnings from lower paying jobs to reduce damages.

By Barbara Green and Jacquelyn Tran

In the recent decision of William Williamson v Brandt Tractor Inc, the Ontario Court of Appeal affirmed that termination for just cause requires clear evidence of the employee’s misconduct. Furthermore, mitigation income earned during the reasonable notice period is generally deductible from wrongful dismissal damages, even if the replacement job is lower-paying or less comparable.

Factual Background

At the time of his dismissal, Mr. William Williamson was a 56-year-old salesperson employed by Brandt Tractor Inc. (“Brandt Tractor”), where he had worked for 18 years. During his employment, there were multiple complaints from the public regarding his sales practices. In 2021, Brandt Tractor terminated Mr. Williamson, relying on his prior disciplinary record and an August 30, 2021 customer complaint against him (the “August Incident”).

The Court noted that dismissal without notice requires serious misconduct, meeting the higher threshold of wilful misconduct, disobedience, or breach of duty under the Employment Standards Act, 2000, SO 2000, c. 41 (the “ESA”) and its regulations. The parties agreed the August Incident alone was insufficient, so Brandt Tractor relied on the cumulative misconduct principle; the idea that a final employee incident can “break the camel’s back.”

Analysis

The central issue was whether the August Incident amounted to misconduct justifying discipline. The trial judge found that just cause was not established because the employer’s case rested on a hearsay account of a customer complaint, and the customer did not testify. The Court noted that Brandt Tractor could have called the customer as a witness but did not, leaving no reliable basis to determine whether the alleged misconduct actually occurred or whether the customer simply chose to take their business elsewhere. Although Mr. Williamson was not fully credible, that did not establish misconduct. Mr. Williamson’s termination without notice of payment in lieu amounted to wrongful dismissal.

Applying the Bardal factors, the trial judge awarded 17 months’ reasonable notice, reflecting his long service, senior sales role, age, and job prospects.

Regarding mitigation, Mr. Williamson’s acceptance of a lower-paying driving job did not reduce damages. The trial judge held that while employees must seek comparable work, earnings from inferior employment are not deductible and that Brandt Tractor failed to prove a failure to mitigate.

Finally, the trial judge rejected punitive damages. While an ESA breach can be an actionable wrong, it is not automatically enough; punitive damages require additional egregious conduct, which was not present here.

At the Ontario Court of Appeal

The Court of Appeal allowed Brandt Tractor’s appeal in part. It upheld the finding of no just cause, holding that there was no admissible evidence from the customer to prove Mr. Williamson’s misconduct. As a result, Brandt Tractor failed to meet its evidentiary burden, and the trial judge’s conclusion was entitled to deference.

The Court of Appeal also agreed that mitigation was properly made out, finding that Brandt Tractor failed to prove both the availability of comparable employment and the likelihood that Mr. Williamson would have obtained it had he pursued it.

However, the Court of Appeal held that the trial judge erred in refusing to deduct post-termination earnings. Income earned during the notice period is generally deductible regardless of whether the new job is inferior. Accordingly, Mr. Williamson’s mitigation earnings of $32,881.43 had to be deducted from the damages for the 17-month notice period, resulting in a limited reduction of the award.

Key Takeaways

1. A central failure for the employer was relying on a customer complaint without calling the customer to testify. The Court treated the complaint as hearsay and gave it little weight. Therefore, if an employee’s misconduct is disputed, you need firsthand or admissible evidence, not summaries or second-hand reports from the employee’s manager.

    

2. Even though the judge had doubts about the employee’s credibility, that did not automatically prove the employer’s version. The Court emphasized that a lack of credibility in one witness does not prove the opposing version is true. The party alleging wrongdoing still carries the burden of proof.

    

3. Even if an employer breaches the ESA, that alone is not enough for punitive damages. There must be aggravating, high-handed, or egregious conduct on the part of the employer.

    

4. Courts will generally reduce wrongful dismissal damages by any income earned during the notice period, even if the new job is inferior in status, pay, or prestige. Job quality or comparability does not affect deductibility; what matters is simply that income was earned during the notice period.