Written by Michael J Weiler

The Ontario Court of Appeal has upheld a trial judge’s award of $104,000 based on a notice period of 20 months for a long-serving McDonald’s restaurant manager.

Esther Brake worked at various McDonald’s restaurants for more than 25 years.  She joined the Defendant employer organization in Ottawa in 1999.  She was terminated on August 2nd, 2012.  At the time of hiring the employer gave her a letter confirming her service credit which stated, inter alia, that she was “…credited with 7 years of Full Time service as of 1999”.

Ms. Brake was, it appears from the record, an excellent employee.  However in the last few years of her employment she was given less favourable evaluations.  She was transferred to a very poor performing store and then placed on a McDonald’s progressive discipline program known as GAP.  The trial judge found that the GAP program was arbitrary and that McDonald’s had unfairly assessed Ms. Brake’s performance.  McDonald’s claimed Ms. Brake had failed the GAP program and gave her a choice between a demotion to First Assistant or termination.   Her salary would remain the same but her benefits would be “meaningful inferior”.  She refused the demotion and sued for constructive dismissal.  The trial judge was very critical of McDonald’s application of the GAP program to Ms. Brake.  He held that any difficulties in Ms. Brake’s performance did not “amount to anything close to gross or serious incompetence and stressed that, by the end of the GAP program, Ms. Brake had met [McDonald’s] ‘new and improved’ standards” and that “she was trending upward at an extraordinary degree when the decision to demote her was put on the table.”

The Court of Appeal upheld the trial judge’s decision that Ms. Brake had been constructively dismissed when McDonald’s offered her a non-supervisory position with inferior benefits.  She did not accept the demotion. The case provides a very thorough examination of what constitutes a constructive dismissal and applies the analysis of the Supreme Court of Canada decision in the recent decision in Potter v New Brunswick Legal Aid.  The Court of Appeal noted that if the employer was in fact arguing it had cause to dismiss Ms. Brake it did not have cause as the trial judge’s findings of fact were a complete answer to that assertion.

The court also considered McDonald’s argument that Ms. Brake failed to mitigate by not accepting the demoted position.  She would have had to work under a younger man whom she had trained and found that embarrassing and humiliating.  The court found that a reasonable person in Ms. Brake’s position would not have been expected to have accepted the demotion to First Assistant.

In terms of what was reasonable notice the court upheld the trial judge’s assessment that 20 months was reasonable.  One key factor was Ms. Brake’s length of service.  McDonald’s argued that its recognition of her prior service with other McDonald’s restaurants was limited to benefits.  The court disagreed noting that although the letter of service credit referenced benefits it also suggested that service was to be recognized for all purposes.  Simply put McDonald’s had not clearly limited the recognition of service as it now argued.  Yet another example of an employer failing to “say what you mean and mean what you say”.

Finally the case provides a lengthy discussion of mitigation.  It concluded for example that EI payments are not to be deducted.  It also held that income earned during the statutory notice period was not subject to mitigation and therefore any income she earned in that period was not to be deducted.

What is most important about the decision on mitigation is how the court treated income earned by Ms. Brake during the 20 month notice period but outside the statutory notice period.  The majority of the Court of Appeal held that since Ms. Brake had worked at Sobey’s to supplement her income while working at McDonald’s any income earned was not to be deducted.  The majority left open for another day the question as to when “supplementary employment income rises to a level that it (or a portion of it) should be considered as a substitute for the amounts that would have been earned under the original contract” of employment and therefore should be deducted.

What is very interesting is the concurring decision of Feldman J.A.   He held that the income Ms. Brake earned in the cashier position at Home Depot was not to be deducted.  He stated:

It follows, in my view, that where a wrongfully dismissed employee is effectively forced to accept a much inferior position because no comparable position is available, the amount she earns in that position is not mitigation of damages and need not be deducted from the amount the employer must pay.

This finding seems to me to be questionable and appears to run contrary to other authority.  In my view while an employee may not have to accept the inferior position, when she does the earnings should be deducted.

The Appeal was dismissed with costs assessed at $19,500 which might well have been less than her actual legal fees to defend the appeal.

Brake v PJ-M2R Restaurant Inc., 2017 ONCA 402 (CannLII)