Humphrey v. Mene at the Court of Appeal
A few months ago, the Ontario Court of Appeal decided the appeal in Humphrey v. Mene - I commented about the ONSC decision back in 2021.
The appeal succeeded, partially, on one point: The Court of Appeal found that declining a position with equivalent compensation several months into the notice period, she acted unreasonably and failed to mitigate.
However, there's some good discussion of the other unsuccessful grounds of appeal relating to the length of the notice period, and aggravated and punitive damages.
Reasonable Notice Period
The Employer argued that, in light of her relatively modest salary, the Court shouldn't have viewed her as such a senior and high-responsibility employee. The Court of Appeal's commentary on this is pretty good: On the facts, the salary is more indicative of the means of the company than her own level of responsibility.
While a twelve month notice period was at the high end, it wasn't outside the range of permissible outcomes.
Bad Faith Dismissal for Cause
One of the reasons this decision was so interesting was that it involved significant damages flowing from an employer taking a 'just cause' position in bad faith. They didn't back off their 'just cause' position at trial because they didn't think they had cause; they backed off of it only because they had destroyed the evidence they needed to prove it. (Pro tip: Any time your argument tries to justify your conduct by noting that you'd destroyed relevant evidence, you're in a rough spot.)
This is often tricky: The test for 'just cause' is high, and not every case falls into two neatly-differentiated categories of "provable just cause" or "just cause alleged in bad faith". There are plenty of cases where an employer has a legitimate just cause argument that falls short of meeting certain thresholds. (See, for example, Mulvihill.)
However, the motions judge had looked at the employer's own documentation, exaggerating the conduct relied upon to buttress a 'for cause' argument, as evidence that it went in looking for a justification to fire her for cause. The Court of Appeal upheld this reasoning.
Duty of Good Faith and Fair Dealing in the Manner of Dismissal
The employer argued that the motions judge had improperly relied on pre-termination conduct to justify aggravated damages.
The logic behind this argument is that the 'duty of good faith and fair dealing', as we call it, only technically relates to the 'manner of dismissal'. By looking at the inappropriate and toxic management conduct prior to the dismissal, the employer argued, the court extended a dismissal-related obligation into something different.
The Court of Appeal wasn't convinced. Firstly, they concluded that the award of aggravated damages wasn't premised on bullying throughout the course of her employment, but rather was focused on conduct with a nexus to the dismissal itself. The 'manner of dismissal' isn't limited to the moment of dismissal, but extends to pre- and post-termination conduct related to the dismissal.
(Side note: Strategically, the 'no evidence of bad faith in asserting just cause' and 'shouldn't look at pre-termination conduct' arguments look pretty tough to put beside each other: When we're making inferences of bad faith in the employer's conduct, that pretty much demands a broader contextual analysis of the conduct between the parties.)
Evidence of Compensable Harm
One of the difficulties of this type of law, since Honda, has been proving compensable harm flowing from bad faith conduct, in large part because you need to prove not only that you suffered harm from the employer's conduct, but also because the harm can't flow from the fact of dismissal itself.
Some degree of emotional distress is to be expected following dismissal. The employer's only liable if its bad faith conduct caused something more.
In this case, there was evidence that she attended a psychotherapist following dismissal, and the plaintiff had given evidence of her embarrassment, humiliation, and reputational impact. The Court of Appeal found this to be enough to warrant the damages.
This is meaningful for Ontario wrongful dismissal cases: It's strong authority warranting aggravated damages on somewhat more relaxed evidence than what many courts have been looking for.
Mitigation
The employer made several arguments as to mitigation:
First, that there should have been a greater reduction because of the plaintiff's failure to start looking for a job for six months. The Court of Appeal rejected this argument: It's not the case that 'any delay' results in a reduction of the notice period, and there's no precise formula for calculating the impact of a mitigation delay. The trial judge's finding was 'generous' but entitled to deference.
As I argued in my earlier post, I find these arbitrary reductions based on inadequate efforts to be analytically problematic: The burden on the employer to prove failure to mitigate is not only to establish a failure to act reasonably by the employee, but also to show that, had she acted reasonably, it's more likely than not that she would have successfully mitigated. If the judge was satisfied that she'd have found additional work with reasonable efforts within those first six months, the reduction should have been much more significant than 'one month'. If the judge was not so satisfied, then the employer didn't satisfy its burden.
Secondly, the employer argued that the employee failed to apply for other jobs that she should have. The motions judge concluded that there wasn't adequate evidence to show that these jobs were comparable, and the ONCA deferred to that finding.
The third argument, however, dealt with the VP E-Commerce position that she declined. She turned it down because the managerial authority wasn't as broad as she was looking for - she wanted a "C-Suite" title (which she'd had at Mene) and greater compensation, which the prospective employer wasn't willing to offer. The motions judge found that there wasn't adequate evidence to show that it was equivalent; the ONCA thought this set the bar too high.
In my view, the availability of this comparable role seven months post‑termination means that Ms. Humphrey turned down a position that could reasonably have mitigated her damages. While the onus on a defendant in this context is a heavy one, on the evidence before the motion judge, Mene met its obligation of demonstrating that Ms. Humphrey’s damages for the balance of the notice period could reasonably have been avoided. Ms. Humphrey had no obligation to accept the offer made to her, but the effect of her rejection of this comparable position was to limit her recovery from Mene for compensation in lieu of notice to the point at which this comparable job offer was made, seven months post-termination.
This surprises me for a few reasons.
Firstly, as we've already covered, she had a high responsibility role that was underpaid at Mene. If her evidence is that the prospective role would have been into a lower responsibility position, the comparable compensation can't be taken as refuting that evidence, and so it's tough to say that the motions judge was wrong to find that the roles weren't comparable. This finding should have been entitled to deference, on the evidence surveyed by both courts.
Secondly, the subtext implies that the fact that the opportunity arose after seven months of unemployment affects the reasonableness of the decision to turn it down. This has echoes of past arguments that seeking the 'right' employment means seeking "that which might be readily available" - that the lack of availability of similar work drives an expectation that the employee will be more open to accepting work that is less similar. The Ontario Court of Appeal has historically rejected such propositions, as in Rienzo.
Thirdly, the ONCA here seems to de-emphasize the nature of the role, focusing on the opportunity to reduce her loss. The characterization that she "had no obligation" to accept the offered position is broadly inconsistent with the way that we usually discuss mitigation: We ubiquitously describe a 'duty' to mitigate or an 'obligation' to mitigate, which duty or obligation upon the plaintiff is concomitant to the action seeking damages flowing from the losses to be mitigated.
Bluntly, when the Ontario Court of Appeal characterizes mitigation as something other than an 'obligation', they are stepping well outside some pretty basic principles of damages.
Punitive Damages
The employer argued that the conduct found to warrant punitive damages was "perfectly reasonable litigation conduct". The Court of Appeal didn't buy it: The motions judge characterized their conduct as "reprehensible" and it was warranted on the record.
On the cross-appeal, the plaintiff argued unsuccessfully that the quantum wasn't enough to meet the denunciation objectives of punitive damages. There isn't much remarkable about this, except for their last argument - that the reduction of compensatory damages should trigger an increase to punitive damages.
The Court of Appeal dealt with this in a cursory fashion, finding 'no basis' for it, but I think it's an interesting argument with interesting implications:
There's a fair bit of case law suggesting that the overall liability of a defendant is relevant to the quantification of punitive damages - if you're already being forced to pay a sizeable amount for losses incurred by the other party, that sends a message even without necessarily being forced to pay significant additional amounts in punitive damages. (Conversely, we don't want punitive damages to be wildly disproportionate to the value of the injury suffered.)
So if the compensatory damage award drops on appeal, then it might make sense to revisit whether the damage award, in its entirety, is sufficiently punitive.
I might suggest, too, that there are different views of different types of damages: In most torts - where the compensation relates injuries suffered by the plaintiff, but where the defendant has incurred no corresponding benefit - every dollar paid by the defendant is a dollar of pure loss. This is distinct from many 'breach of contract' cases, where the defendant probably saved some money by breaching. In most wrongful dismissal files, 'pay in lieu of notice' is more-or-less equivalent to what the employer would have had to have paid the person anyways. (The real cost to the defendant in a wrongful dismissal case is more about the lack of productivity in exchange for that compensation, but presumably they didn't value that productivity at the same level as the person's wages.) In some contract cases, compensating the plaintiff is actually cheaper than completing the contractual obligations; this is what we call 'efficient breach', and if there were some conduct worthy of punishment in such a case, it would be simply wrong to view the compensatory damages as having some kind of punitive impact.
Furthermore, in a contract case with punitive damages - which are relatively rare at the outset - there's almost always going to be a question of the strength of the nexus between the 'breach of contract' itself and the conduct calling for denunciation. You can dismiss a person without notice without doing anything 'reprehensible'.
So, if we're asking whether compensatory damages have the effect of 'punishing' the employer enough to send a message not to mistreat employees, I'd argue 'no'. I think it would be analytically flawed, therefore, to look at a mitigation discount as requiring an offset in punitive damages.
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This post does not contain legal advice, but only general legal information. It does not create a solicitor-client relationship with any readers. If you have a legal issue or potential issue, please consult a lawyer.
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