When an Ontario worker is terminated, calculating wrongful dismissal damages can quickly become complicated if they find a new job. Specifically, if a dismissed employee lands a lower-paying replacement role during their notice period, can those new earnings be deducted from their final court award?
Recently, the Ontario Court of Appeal answered this question decisively in Williamson v. Brandt Tractor Inc., 2026 ONCA 272. Therefore, this landmark decision now carries critical implications for any active employment claim in Toronto.
Case Background: Assessing Wrongful Dismissal Damages at Trial
In May 2025, the Ontario Superior Court of Justice handled the initial trial. Justice R. Lee Akazaki awarded Mr. Williamson 17 months of pay in lieu of notice after finding no just cause for his termination.
However, the legal battle centered on two contentious points:
-
The Just Cause Allegation: The employer alleged cause based on a customer complaint. Yet, the trial judge rejected this because the employer failed to present first-hand evidence from that customer.
-
The Mitigation Income: Additionally, the trial judge refused to deduct roughly $32,881 that Williamson earned at a new job. The judge reasoned that the replacement role was an inferior, lower-ranking position.
The Court of Appeal’s Decision: Mitigation Must Be Deducted
Subsequently, the employer appealed the ruling. The Court of Appeal partly allowed the appeal, finding that the trial judge made a clear legal error regarding mitigation.
As a rule, there is no authority in Ontario that exempts earnings from an “inferior” replacement role. Instead, the court relied on the binding framework from Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402. This precedent dictates that employment income earned during a notice period must generally mitigate the overall loss.
The legal misstep: The trial judge mistakenly relied on a concurring opinion from Brake, which does not represent binding law. Consequently, $32,881.43 was deducted from Williamson’s final award.
Just Cause and Mitigation: The Employer’s Burden
Furthermore, the Court of Appeal upheld the finding that the employer lacked just cause. The justices identified no palpable or overriding errors in that specific assessment.
1. A High Evidentiary Bar for Just Cause
This decision reinforces that employers face an incredibly heavy burden. Without direct, first-hand evidence from key witnesses, a “for cause” defense will almost always fail at trial.
2. The Evidentiary Burden of Job Hunting
On the other hand, the court rejected the employer’s argument that Williamson failed to look for comparable work. The employer simply did not prove that better positions were readily available. Ultimately, an employee’s choice of work does not relieve the employer of its strict duty to provide concrete market evidence.
Because Williamson largely succeeded on the core merits of the appeal, he was awarded all-inclusive costs of $15,000.
Key Takeaways for Toronto Employees
-
Lesser roles still impact your claim: New earnings will generally be deducted from your total compensation. Therefore, you must plan accordingly when negotiating a severance package.
-
You do not have to accept any job: You must take reasonable steps to find work. However, you are not forced to accept completely unsuitable roles.
-
Document your entire search: Track every application, interview, and follow-up. These records serve as vital evidence if your case goes to court.
Key Takeaways for Toronto Employers
-
Just cause requires firsthand proof: Do not rely on hearsay or second-hand reports. Without direct witness testimony, your defense will likely fall apart.
-
Mitigation arguments require data: You must establish that comparable opportunities actually existed in the local market. Speculation is never enough.
-
All notice-period earnings reduce exposure: If properly pleaded, earnings from a lesser role will directly lower your damages liability.
How a Toronto Wrongful Dismissal Lawyer Can Help
Employment claims turn on careful factual analysis. Courts must carefully evaluate age, length of service, the job market, and termination clauses.
As Williamson demonstrates, financial outcomes can shift significantly between trial and appeal. Indeed, a single misstep regarding mitigation can cost tens of thousands of dollars. Whether you are an employee negotiating a package or an employer assessing your financial risk, our litigation team can protect your interests.
Contact Z Legal today to schedule a consultation with an experienced Toronto employment litigation lawyer.
Disclaimer: This article provides general information only. It does not constitute formal legal advice. For guidance on your specific situation, please contact Z Legal directly.
