Feb 8, 2020

What happens to termination pay if you find new employment for better pay?

Kideckel v. Gard-X Automotive Refinish Inc., 2020 CanLII 123 (ON SC)

Employees who are terminated and are seeking to improve their termination offer have the obligation to mitigate. Mitigating means attempting to minimize the loss suffered. In employment law, the terminated employees have a duty to seek work that is comparable to their old job in terms of compensation and position during their reasonable notice period. If they find work during that period at the same level of compensation, usually the employee is said to have ‘mitigated’ or is entitled to notice payment only up to the date of re-employment. If an employee finds a job earning less, then the employee will get a top-up of the difference in pay between the new job and their last job.

What happens in a situation where the employee mitigates with a job that pays more than their previous job? Can the employer take the surplus earning and apply it to the months in the notice period where the employee was not employed? The Ontario Divisional Court in Kideckel v. Gard-X Automotive Refinish Inc., 2020 clarified this issue. In Kideckel, the terminated employee worked for his former employer for almost 8 years as a delivery driver and was 65 years old at the time of termination. At his termination, the employer provided him 3 months’ working notice. Two weeks later after the working notice, the employee was hired at a job where he earned more due to his overtime work. The employee sought for damages for at least the two weeks of unemployment.

At trial, the Court looked at two conflicting case laws to help decide on the issue. In the Ontario Superior Court decision of Bremner v. Trend Housewares Ltd. the Court found that the employee is entitled to zero damages should they find a better paying job.

The New Brunswick Court Appeal in LeBlanc v. Eurodata Support Services Inc. on the other hand, held that any additional notice owing from the employer will stop on the day that the employee is hired at a job for a better rate of pay.

The Court followed the decision in LeBlanc where the Court noted that had the employer paid adequate notice at termination, the employee would have earned income from this employer until they find new employment. Therefore, the employer may not “backfill” the period of unemployment with the surplus in earning.

For employees seeking re-employment while negotiating a better termination package, employees can expect to receive a bridge from their old job to their new job if they find one during the notice period regardless of the rate of pay. For employers, while you will not get additional credit if the employee receives a better paying job, it will always be in your interest – and the employee’s interest – to aid an employee in obtaining alternate employment with the provision of a reference letter or career counselling services.

If you as an employee or an employer is dealing with a termination, it is important that the termination package is adequate and reasonable. At Monkhouse Law, we frequently conduct reviews of termination offers.


Note: The above post is general information about this specific case. If you have specific questions about your employment situation, you can contact Monkhouse Law for a free phone consultation.