'What an employee actually has to do to mitigate damages is pretty easy': lawyer
A worker who was fired without cause following misconduct was wrongfully dismissed and entitled to damages for eight months’ notice, but not any bonus payable during the notice period, a New Brunswick court has ruled.
The worker, 53, began his employment with coffee shop company Starbucks in 2015 as a store manager in Toronto. During the pandemic, Starbucks considered the store and offered the worker an opportunity to relocate to New Brunswick in early 2021. The worker became manager of a Fredericton Starbucks in March.
In September 2022, the worker oversaw a training program for which staff were provided with t-shirts. A staff member identifying as non-binary requested a specific size of t-shirt and the worker replied, “Is that going to fit the girls?” in reference to the employee’s breasts.
The non-binary employee made a formal complaint to Starbucks, which investigated and determined that the worker had breached the company’s anti-harassment standard. On Nov. 10, Starbucks terminated the worker’s employment without cause, although it stated that he violated the standards of business conduct. The company gave the worker four weeks’ pay in lieu of notice and offered a further 20.5 weeks’ pay that was contingent on him signing a release. The worker declined to sign the release, so he was left with the four weeks’ pay.
Wrongful dismissal
The worker launched a wrongful dismissal action claiming compensation for 10 months’ pay in lieu of notice. Starbucks conceded that the worker was entitled to reasonable notice for his without-cause dismissal, but it maintained that the appropriate notice period was five to seven months.
The court determined that an appropriate period of reasonable notice was eight months, considering the worker’s age at dismissal – 50 years old - his seven years and seven months of service, and previous managerial experience.
“When you look at other cases that talk about the Bardal factors for figuring out the length of notice, they say there's no formula and it's very fact-specific,” says Chris Pelkey, an employment and labour lawyer at McInnes Cooper in Fredericton. “But what we've actually seen in practice in New Brunswick is that one month per year of service has been a pretty reliable rule of thumb – and this finding reinforces that they’re going to look at the various factors, but unless there's something really out of the norm, employers can expect about one month per year of service if they end up in court.”
However, Starbucks argued that the worker failed to mitigate his losses from the termination, pointing to the worker’s acknowledgment that he didn’t actively seek employment for four months after his termination. The worker said that he suffered from persistent depressive disorder (PDD), and it worsened following his firing. He didn’t provide direct medical reports from a doctor, but he testified as to his symptoms, provided pharmacy records of his anti-depressive medications, and therapy attendance logs dating back to 2016. He said he started looking for work when he felt better in February 2023.
Starbucks also alleged that the worker didn’t look for employment from May to September 2023, during which time the worker renovated his house to attract renters.
Proof of mitigation
The court accepted the worker’s non-medical evidence as sufficient to support his claim that was “suffering mental distress that precluded his ability to seek alternative employment,” even though the worker didn’t set out how it impacted his ability to search for employment. It noted that the jurisprudence established that medical evidence isn’t required to establish a mental injury if there is credible other evidence.
The court’s decision highlights that employees have a low threshold to defend themselves against allegations that they haven’t mitigated their losses, according to Pelkey.
“What an employee actually has to do to mitigate damages is pretty easy - they don't have to go out and be aggressive in finding jobs, they really just have to do something,” he says. “And the court was a little more comfortable going with a lesser evidentiary standard than you would see in other determinations [regarding disability], and also pulling cases out of Ontario and BC, where courts have said you don't need to have an expert come in and testify that your mental or physical disability prevented you from finding work – it goes back to that low standard that employees have to meet, and it not really making sense to bring in experts every time something like that is brought up.”
As for the worker’s period of house renovation, the court found that there was no evidence it hindered his job search efforts. The worker showed that he applied for eight jobs from May to September 2023 and testified that he regularly conducted internet job searches on a job website and the federal government website.
The court also found that, even if the worker’s mitigation efforts were insufficient, Starbucks failed to prove there was comparable work available. The company only provided Statistics Canada tables showing employment data in the “accommodation and food services” category during the reasonable notice period with no specifics, which didn’t meet the employer’s burden of proof required to decrease the notice period entitlement for a failure to mitigate, the court said.
Claim for bonus entitlement
The worker also claimed entitlement to damages for lost bonuses under Starbucks’ Retail Store Management Incentive Plan (RMIP). A 2013 version of the RMIP stated that someone was entitled to the incentive payout if they remained “in an eligible position through the end of the plan period, unless employment is terminated prior to the end of the plan period due to death or disability” and they refrained “from engaging in any activity that could be construed as misconduct, as determined by Starbucks in its sole discretion...” An updated 2022 version of the plan had similar provisions relating to refraining from engaging in misconduct and stated that “if a participant’s employment is terminated for a reason other than disability, death, or retirement, no incentive will be paid for the plan period.”
While the court accepted that the bonus was an integral part of the worker’s compensation, it found that the RMIP unambiguously excluded bonus payments following termination of employment not caused by death, disability, or retirement. Starbucks had determined, following an investigation, that the worker’s behaviour towards the non-binary employee constituted misconduct under the RMIP, so the worker wasn’t entitled to any bonus payment for the reasonable notice period, said the court, noting that there was no material change in the misconduct clause from the 2013 to the 2022 version of the RMIP.
The specificity of the RMIP was key here, as often employers don’t have language that expressly disentitles fired employees to bonuses during the reasonable notice period, says Pelkey.
“[Starbucks] included very specific language about when an employee would be disentitled, and it was very clear that if this person has engaged in misconduct and they're terminated without cause, they're not going to be entitled to their bonus,” he says. “That was key for Starbucks, that they had a specific policy and it could rely on it to argue that the worker wasn't entitled to the bonus.”
Employer’s discretion to determine misconduct
An interesting element was that the worker argued the RMIP clause wasn’t triggered because his misconduct wouldn’t have met the just-cause standard, but the court said that it didn’t matter, according to Pelkey.
“The court essentially said, ‘That's not the question, the clause says [misconduct] in the employer’s sole discretion],’” he says. “These comments are helpful to an employer, because the court's saying it’s going to defer to the employer on what’s misconduct that would disentitle the worker to the bonus - it gives the employer a lot of leeway and wiggle room to make reasonable decisions that can disentitle employees from something to which they would otherwise be entitled [during the notice period].”
The court partially accepted the worker’s claim for lost fringe benefits, including lost Canada Pension Plan contributions, out-of-pocket expenses on prescription medications and psychotherapy during the notice period, and lost employer RRSP contributions.
Starbucks was ordered to pay the worker a total of $52,251.02 in damages representing eight months’ reasonable notice and lost benefits, plus interest.
While Starbucks was unable to get the notice entitlement reduced for a lack of mitigation, its clear bonus policy helped avoid additional damages for a bonus entitlement, says Pelkey.
“Look at your policies, remove ambiguous language, and make sure that any language that’s going to disentitle an employee from something to which they would otherwise be entitled is clear, direct, and unambiguous,” he says. “And keep your finger on the pulse of these decisions, just to see how far courts are going to be willing to let employers go on determining whether or not an employee has done something that might trigger one of these eligibility requirements.”
See MacDonald v. Starbucks Coffee Canada, 2025 NBKB 67.
