Terminated Employees With Incapacitations May Nonetheless Fulfill Their Mitigation Obligations

Employees who are terminated without cause are entitled to either reasonable notice or payment in lieu of reasonable notice. This is the "Notice Period" an amount of time, or a level of compensation, to assist a dismissed employee find comparable work. At common law, the Notice Period is "reasonable notice," which varies with the circumstances of any particular case. (For a history of the development of the common law, see Machtinger v HOJ Industries Ltd).¹ The Notice Period is also a statutory entitlement pursuant to the Employment Standards Act, 2000.³

This Notice Period entitlement is the "damages" experienced by the employee as a result of the wrongful termination. "Mitigation" is a limiting principle in damages, imported into the employment context from contract law.³ In other words, when an employee has been terminated without cause, they have a legal duty and obligation to act reasonably by taking steps to replace their income.

• Read more: Employers Must Discharge Their Onus to Prove Failure to Mitigate

When it comes to fulfilling mitigation obligations, terminated employees with incapacitations or other limitations face unique challenges. For some terminated employees with physical or mental health issues, it may seem daunting or even impossible to fulfill this duty. As a recent decision of the Ontario Court of Appeal illustrates, terminated employees with incapacitations may nonetheless fulfill their mitigation obligations — even with negligible attempts to find alternate employment.

Krmpotic v Thunder Bay Electronics Limited, 2024 ONCA 332⁴

In 1974, Drago Krmpotic commenced his employment with Thunder Bay Electronics Limited and Hill Street Financial Services. Mr. Krmpotic was a loyal employee who performed a broad range of physically demanding skilled tasks. After nearly thirty (30) years of devoted service, Mr. Krmpotic was terminated without cause.

Immediately prior to his termination, Mr. Krmpotic had been on medical leave to recover from back surgery, a procedure which was necessitated as a direct result of four different back injuries he sustained at work. Nonetheless, Mr. Krmpotic was terminated by his employers only hours after he returned to work following his surgery. At the time, he was sixty-nine (69) years old.

The manner of dismissal rose above the normal distress and hurt feelings caused by a dismissal. Consequentially, Mr. Krmpotic experienced anxiety, depression, fear, poor sleep, frustration, and feelings of helplessness and defeat. He also continued to suffer such physical ailments such as back pain and knee pain as a direct result of his workplace injuries.

At trial, it was determined that Mr. Krmpotic was entitled to a notice period of twenty-four (24) months, together with aggravated damages owing to the manner of dismissal.

• See related reading: Notice Periods for Employees Terminated Without Cause May Exceed Twenty Four Months if the Circumstances are 'Exceptional'

During the notice period, Mr. Krmpotic did not mitigate his damages — he was simply unable as a result of his incapacity.

Mr. Krmpotic's employers argued that this notice period should be reduced based on his failure to mitigate his damages. Indeed, the trial judge noted that his efforts to replace his income were "scant at best." However, this fact was considered in context together with his age, the fact that he was recovering from back surgery related to his work, and that he was "significantly limited in his ability to perform the physical labour which his occupation demands on a daily basis."

Notably, the latter finding that Mr. Krmpotic was substantially physically hindered was not established through any expert medical evidence, but through the evidence of Mr. Krmpotic and his immediate family members. Specifically, the trial judge accepted the evidence of Mr. Krmpotic's wife and son that he was unable to work during the applicable notice period.

Crucially, the Court explicitly rejected the notion that physical incapacity can only be established by expert medical evidence. In fact, the Court found that the trial judge properly considered a medical report which described that while Mr. Krmpotic had some physical capacity, it was silent regarding his ability to carry on highly demanding physical labour.

On appeal, the Court did not disturb the trial judge's finding that Mr. Krmpotic was physically incapable of performing physically demanding work during the applicable notice period. Thus Mr. Krmpotic fulfilled (or obviated) his duty to mitigate his damages due to his incapacitation. The Court also did not disturb the award of aggravated damages, despite also being in the absence of expert medical evidence.⁵

Conclusion

This case sheds light on the unique challenges faced by terminated employees with incapacitations. Despite the daunting task of seeking alternate employment, particularly for those grappling with physical or mental health issues, the Ontario Court of Appeal's decision in Krmpotic underscores that such employees may still meet their mitigation duties.

Takeaways for employers:

• When dealing with employees, be candid, reasonable, honest and forthright, and refrain from engaging in conduct that is unfair or in bad faith by being untruthful, misleading or unduly insensitive.
• Acknowledge and accommodate the unique challenges faced by terminated employees, particularly those with incapacitations or other health issues.
• Understand that employees with limitations may face difficulties fulfilling mitigation duties and that these factors should be considered when assessing termination outcomes.

Takeaways for employees:

• Understand your entitlements regarding reasonable notice or payment in lieu of notice in case of termination without cause.
• Keep records of medical reports, communications with your employer, and any evidence supporting your physical or mental limitations or incapacitations.
• Communicate openly with your employer about any limitations or health issues which may affect your ability to seek alternate employment.

As employment law continues to evolve, cases such as this serve as important reminders of the importance of fairness, empathy, and equitable treatment in the workplace, especially during challenging transitions like terminations.

Footnotes

1. Machtinger v HOJ Industries Ltd, 1992 CanLII 102 (SCC).

2. Employment Standards Act, 2000, SO 2000, c 41.

3. Evans v Teamsters Local Union No 31, 2008 SCC 20 (CanLII) at para 97 [Evans], citing S M Waddams, The Law of Damages, loose‑leaf ed (Toronto: Canada Law Book, updated October 2004, release 13) at 15.70; see also: Darbishire v Warran, [1963] 1 WLR 1067 at para 1075, cited by Evans at para 97:

"...it is important to appreciate the true nature of the so-called 'duty to mitigate the loss' or 'duty to minimise the damage.' The plaintiff is not under any actual obligation to adopt the cheaper method: if he wishes to adopt the more expensive method, he is at liberty to do so and by doing so he commits no wrong against the defendant or anyone else. The true meaning is that the plaintiff is not entitled to charge the defendant by way of damages with any greater sum than that which he reasonably needs to expend for the purpose of making good the loss."

4. Krmpotic v Thunder Bay Electronics Limited, 2024 ONCA 332 (CanLII).

5. Specifically, the Court noted at para 34:

"Mental distress is a broad concept. It includes a diagnosable psychological condition arising from the manner of dismissal but is not limited to that. There is a spectrum along which a person can suffer mental distress as a result of the manner of dismissal. At one end is the person who suffers the normal distress and hurt feelings resulting from dismissal, which are not compensable in damages. At the other end of the spectrum is the person who suffers from a diagnosable psychological condition as a result of the manner of dismissal. In between those two end points, there is a spectrum along which the manner of dismissal has caused mental distress that does not reach the level of a diagnosable psychological injury."

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