Posted: July 20, 2017
By: Steve Rastin

The Plaintiff/Respondent was a 62-year-old woman who had worked for McDonald’s for more than 25 years (most of this time as a Store Manager), when she was asked to choose between a demotion to the position of ‘First Assistant’ or termination of her employment. Given that the offer was humiliating and embarrassing after her many years of service, the Plaintiff rejected her employer’s offer and was subsequently dismissed without notice or payment as accorded by the Statutory Employment Standards Act.  

In a wrongful dismissal action against her employer, the trial judge awarded the Plaintiff damages in the amount of $104,499.33, which represents 20 months compensation, in lieu of notice.

The trial judge concluded that the Plaintiff was, on the whole, a competent manager with a long track record of successfully meeting the standards expected of her position. She had consistently received excellent performance reviews until 2011, at which time her performance dropped to ‘satisfactory’ based on internal reviews. The judge believed that the Plaintiff had not been given a clear and reasonable opportunity to correct the issues that the Defendant had stated in these later performance reviews. Instead, in November 2011, the Plaintiff was transferred to a failing McDonald’s restaurant located at a Wal-Mart, and was expected to turn it around.

At the new McDonald's location, the Plaintiff undisputedly worked 7 days a week and 12-hour shifts, and never requested overtime pay.  Nevertheless, in a 3-month review meeting in April 2012, the Plaintiff received a rating of ‘needs improvement’.  As a result, she was obligated to attend a Goals Achievement Process (GAP) Program, which required specific goals to be achieved within 90 days. The trial judge found the goals to be arbitrary and unfair and essentially, set her up to fail, as she  was expected to perform to standards that exceeded any that had previously been expected of her. Despite these challenges, the Plaintiff was rated as ‘outstanding’ in 2 of the 3 GAP goals and came close to meeting the third goal.  Although success in the GAP program normally results in an employee’s reinstatement in their regular position, the Defendant instead gave her the option of either accepting a demotion or being fired.

All of the circumstances leading to the Plaintiff’s termination, including the manner in which she had been dismissed, were considered in the trial judge’s decision to rule in the Plaintiff’s favor. Also relevant, was the fact that the plaintiff had worked many years for McDonalds and had little formal education but had risen to a management position through her hard work and perseverance.  Finally, despite reasonable efforts to do so, she was unable to find a relatively comparable job after her dismissal and the judge believed she was unlikely to find a similar position in the future.

The McDonald’s restaurant where the Plaintiff was employed was one of several McDonald's restaurant franchises owned by the company, PJ-M2R Restaurant Inc. (the Appellant/Defendant).  In Brake v. PJ-M2R Restaurant Inc. (2017), the Defendant appealed the trial judge’s decision, arguing that the trial judge erred in the following ways:

  • Failing to provide adequate reasons for his findings of fact and credibility;

  • Deciding that the Plaintiff had been constructively dismissed;

  • Failing to find that, by not accepting the offer of continued employment as a First Assistant, the Plaintiff failed to mitigate her damages, which disentitled her to any payment of damages;

  • Arriving at 20 months for the notice period, and;

  • In his decisions on mitigation during the notice period.

Adequacy of Trial Judge’s Reasons

On the first matter, the Appellant argued that the trial judge did not adequately explain and show how he arrived at his decision and also, the Respondent’s evidence contradicted the findings of fact made by the trial judge. Regarding the latter point, the Appellant referenced the Respondent’s evidence that she was dumbfounded and shocked by the negative review she received in 2011.  The Appellant argued that her reaction made no sense given that the Respondent had signed and agreed with a number of performance reviews which pointed out her shortcomings.

On Appeal, Justice Gillese disagreed with the Appellant and dismissed both arguments. Justice Gillese concluded that the trial judge properly articulated the legal principles relevant to the case, reviewed the evidence, made his findings and expressed how he applied said legal principles to his findings.

Justice Gillese further stated that he saw no errors in the trial judge’s findings and the record supported the findings. Regarding, for example, the Appellant’s evidence regarding the Respondent’s surprise upon receiving a negative review, the judge concluded that the trial judge’s assessment was fair. That is, the trial judge heard evidence from multiple parties and had a full documentary record of the Respondent’s review and it was clear that from 2000-2010, the latter’s overall rating was excellent. Within that context, the judge felt that Respondent’s claim of being shocked and dumbfounded by her negative review was believable.

Constructive Dismissal Finding

Constructive dismissal refers to when an employer has committed a serious breach of contract, causing the employee to resign in response to the employer’s conduct. 

The Appellant challenged the trial judge’s ruling that the Respondent had been constructively dismissed and argued that the Respondent knew what was expected of her and that she was struggling to achieve her goals. The Appellant added that when placed in the GAP program, which was meant to help and improve the Respondent’s performance, she acquired a negative attitude, refused to acknowledge her difficulties and ultimately became a detriment to herself.

The trial judge relied on a decision by the Supreme Court of Canada in Farber v. Royal Trust Co., when making his ruling on this issue. In Farber, the Court asserted that “a demotion, which generally means less prestige and status, is a substantial change to the essential terms of an employment contract that warrants a finding that the employee has been constructively dismissed.”

Based on the findings of fact referenced in the original trial, Justice Gillese disagreed with the Appellant’s arguments and agreed with the trial judge’s ruling. The trial judge found that, when the Appellant offered the Respondent the First Assistant position, which came with significantly fewer benefits than her previous managerial position, a substantial and unilateral change was made to the latter’s contract; and with this action, the Appellant was guilty of constructively dismissing the Respondent.

Plaintiff’s Refusal of Continued Employment Offer

The Appellant asserted that if the Respondent had indeed been constructively dismissed, then she was obliged to take the demotion offered. The Appellant added that the Respondent’s failure to do so breached her obligation to mitigate her damages and thus, disentitled her to receive compensation.

Justice Gillese disagreed.  The issue rested on whether or not a reasonable person in the Respondent’s position would have accepted the demotion offered to her, and the appeals judge found that they would not have done so. Justice Gillese stated that it was unreasonable for the Appellant to have expected the Respondent to accept the demotion to First Assistant. There was evidence, including witness testimony, which demonstrated that the work atmosphere for the Respondent at the time of the 'offer' was insulting, given her skills, experience and personality. Justice Gillese noted that based on that environment, to then expect the Respondent to accept a position that would cause her to have to report to a young man she had trained was humiliating and that it was understandable that she had declined - any reasonable person in her position would have done so. 

Notice Period Damages

The fourth issue focused on the trial judge’s award of damages to the Respondent based on a notice period of 20 months. The Appellant pointed out that the Respondent was employed by the owners/operators of PJ-M2R for only 13 years; prior to that, she worked for other McDonald’s franchises. Therefore, the Appellant argued that, if damages were to be awarded, they should be based on 13 years, with a reasonable period of notice of 8 to 10 months. Once again, the Appeals judge disagreed.

Justice Gillese began his analysis on the awarded damages by first pointing out that the notice period for wrongful dismissal was not, in fact, 20 months but rather, the 20 months period included the Respondent’s entitlement to termination and severance pay under the Employment Standards Act.  Further, Justice Gillese agreed with the trial judge’s interpretation of the Credit Letter that the Appellant sent to the Respondent at the start of her employment with the company. The Letter served as a key piece of evidence in concluding that the Respondent had the equivalent of 20 years of service with the Appellant.

In the Letter, the Appellant noted that its purpose was to confirm the Appellant’s length of service credit and concluded with the statement that the Appellant would be credited with seven years of full-time service as of 1999, the year she started working for the Appellant. In other words, the letter acknowledged the Appellant’s previous years with another McDonald’s franchise. As such, the judge dismissed this argument.

Mitigation during the Notice Period

The final issue of the Appellant’s appeal was in regard to mitigation during the notice period. The Appellant argued that the trial judge erred on this matter when he ruled that the Respondent had made reasonable efforts to mitigate her losses and also, when he failed to deduct the income the Respondent received during the notice period when awarding her damages amount.  The Appellant pointed to the Respondent’s evidence at trial where she admitted to only applying for one job between August 2012 and January 2013, and the job was not a managerial position. On the second argument, the Appellant drew attention to the record of the Respondent’s income from her other part-time jobs during the notice period.

Justice Gillese disagreed with the Appellant and found that the evidence on which the trial judge based his decision supported the latter’s ruling that the Respondent did, in fact, make efforts to mitigate her losses.  Her efforts included increasing her hours at Sobey’s, where she had long worked as a cashier (simultaneously to her job at McDonald’s); she also worked at Tim Horton’s; and she applied for positions at numerous other restaurants and retail businesses. All of these were inferior positions and none of them offered her a management position.   

Justice Gillese disputed the Appellant’s argument that the trial judge erred by not reducing the damages amount the Respondent received during the notice period, since he did not believe that the amounts the Respondent received during the notice period were amounts received in mitigation of loss. Rather, these amounts included employment income benefits, income from the statutory entitlement period under the Employment Standards Act and income during the Balance of Notice Period.

Justice Gillese stressed that the law is clear on employment income benefits, which are not to be deducted from damages awarded in a wrongful dismissal claim. As such, the judge did not agree that those benefits were received in mitigation of loss and were therefore deductible from the damages award.

Regarding the income the Respondent earned during her statutory entitlement period, the judge referenced Justice Lane’s ruling in Boland v. APV Canada Inc., to explain why the amount was not subject to mitigation and thus not deductible from her damages. Essentially, Justice Gillese asserted that statutory entitlements are not damages and are, rather, entitlements to which the Respondent was entitled, whether or not she secured a new full-time job after being dismissed by the Appellant. Therefore, whatever income she earned from other jobs during the statutory entitlement period was not subject to deduction as mitigation income.

Finally, regarding the income the Respondent earned during the Balance of Notice Period, Justice Gillese again concluded that the trial judge made no error in his judgement. The Court acknowledged that, in a wrongful dismissal action, an employer is normally entitled to deductions for income a dismissed employee has earned from other sources during the notice period.  However, the rules change when there has been a breach of contract against the employee.  

Relying on the Supreme Court decision decision in Karas v. Rowlett, if an employee committed to full-time employment with one employer but their contract permitted them to have simultaneous employment with another employer and the full-time employer terminates him/her without any notice, any income earned simultaneously from the second employer is not deductible from damages.  Accordingly, the trial judge concluded that the sum earned during the Balance of Notice Period would not be deducted from the Respondent’s damages.

On the issue of burden of proof, Justice Gillese asserted that, once an employee has proven wrongful dismission and given evidence of his/her losses, the burden of proof shifts to the employer to show that some or all of the employee’s losses were avoidable. Therefore, because the Appellant sought to have the Plaintiff’s employment income that she received during the notice period treated as mitigation income, the onus was on the Appellant to demonstrate what part of that income could be fairly attributed to the Balance of the Notice Period.

For all of the aforementioned reasons, Justice Gillese upheld the trial judge’s decision and dismissed the Appellant’s appeal. Costs were awarded to the Respondent in the amount of $19,500.

A wrongfully dismissed employee has an obligation to minimize or mitigate their losses by making a reasonable effort to obtain a job with a reasonably comparable salary and level of responsibility to the job from which they were wrongfully terminated.  If the person is able to obtain such a position, their income is deducted from their damages. However, in the current case, although the Plaintiff made a best effort to find a reasonably comparable management position, she was not able to do so and had to accept a job at a significantly lower salary simply to earn an income.  In such a case and at the discretion of the judge, the amount the Plaintiff earned in this greatly inferior position is not a mitigation of damages and is not required to be deducted from the amount the Defendant must pay.

 

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