Summary Trial Before End of Notice Period

In a recent decision, Hansen v. Altus Energy Partnership, the Alberta Court of King's Bench awarded a long-term employee 22 months’ compensation (approximately $350,000) in lieu of notice. The matter was deemed suitable to be decided by way of a summary trial on the basis of affidavit evidence, as there was no dispute that the Plaintiff was summarily dismissed without cause and therefore entitled to damages in lieu of reasonable notice. The only issues in dispute related to quantifying the Plaintiff’s damages. What is most significant about the award is that it came over a year prior to the expiry of the Plaintiff’s reasonable notice period, which the Court determined to be 24 months. This raised a dispute between the parties as to how the issue of possible future mitigation should be addressed in the award.

The Plaintiff argued that the Court should consider the possibility of mitigation as it does with any other contingency when assessing damages and, in fairness, the negative contingency that he might not find work until long after the expiry of the notice period needed to be considered. The Plaintiff urged the Court to adopt the approach which has developed in British Columbia, whereby the Court simply applies a deduction to the length of the notice period if there is a significant possibility that the dismissed employee will find work prior to the end of the notice period.

The Defendant disagreed with this approach, arguing that it may create a windfall for the Plaintiff by providing him with judgment for an amount greater than his true damages at the end of the notice period. In order to eliminate this possibility, the Defendant asked the Court to require the Plaintiff to hold any monies he earned from employment during the remainder of the notice period in trust in favour of the defendant. This approach has been applied on occasion by Ontario Courts.

The Court preferred the British Columbia approach and ultimately decided to reduce the Plaintiff’s notice period by two months (from 24 – 22 months) to account for the contingency of future mitigation, reasoning that there is a “realistic possibility” that the Plaintiff will find alternate employment prior to the end of the notice period.

This decision will serve as a precedent for other wrongfully dismissed employees seeking to have their damages assessed prior to the conclusion of the reasonable notice period. Employers should be aware of this possibility, particularly when dismissing long-term employees without cause. Where cause is not in issue, employers have few options to mitigate the risk of being found liable for a lengthy notice period, subject only to a relatively modest deduction for the possibility of mitigation. In such cases, the best strategy for the employer is to immediately offer a reasonable severance package which takes into account the possibility of mitigation. In some cases, it may also be preferable to place the employee on salary continuance and offer incentives for the employee to find alternative employment as soon as possible. Such incentives dramatically increase the likelihood that the employee will promptly and aggressively search for new employment, thereby reducing the employer’s ultimate risk of liability. Moreover, the provision of salary continuance ensures that the employee suffers no immediate loss of income, thereby reducing the Court’s motivation to award the employee damages as soon as possible.