Ontario Court Of Appeal Confirms: All Earnings During The Notice Period Reduce Wrongful Dismissal Damages

In Williamson v. Brandt Tractor Inc., 2026 ONCA 272, the Ontario Court of Appeal (“ONCA”) partly allowed an employer’s appeal, reducing the damages awarded to a wrongfully dismissed employee upon determining that the Trial Judge erred by failing to deduct income earned in mitigation.

Background

The Respondent, a 56-year-old salesperson, was employed by the Appellant for eighteen years. On September 1, 2021, the Appellant terminated the Respondent’s employment, citing cumulative misconduct, including a customer complaint on August 30, 2021, regarding the Respondent’s handling of a sale. The Respondent denied the allegations and commenced an action for wrongful dismissal.

Procedural History

On May 1, 2025, Justice R. Lee Akazaki of the Ontario Superior Court of Justice found that the employer did not have just cause to terminate the Respondent and awarded damages for wrongful dismissal based on a 17-month notice period.

In awarding damages, the Trial Judge acknowledged the well-established principle that a wrongfully dismissed employee has a duty to try to mitigate their losses by making reasonable best efforts to obtain a comparable position. The Trial Judge further noted that, if successful, the earnings from the new position can be deducted. Similarly, if such a position is turned down, the wages that could have been earned can also be deducted.

However, the Trial Judge drew a distinction where the employee finds a lower-paying or ranking position. In those circumstances, as in the case of Mr. Williamson, the Trial Judge held that the resulting earnings were not deductible, relying on a passage from Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 (“Brake”).

The Appeal Decision

The Court of Appeal held that the trial judge erred by refusing to deduct the Respondent’s earnings during the notice period simply because they were earned in a “lower-paying or ranking position”. The Court confirmed that there is no authority for the proposition that earnings that come from an inferior position are not deductible in mitigation. The passage Brake, cited by the Trial Judge, came from a concurring opinion and therefore does not state the law in Ontario.

Instead, the governing principle is set out by the majority in Brake: Subject to additional circumstances not relevant in this case, “employment income earned during the notice period is generally to be treated as mitigation of loss”.

Applying that principle, the Court reduced the damages award by the amount the employee actually earned during the notice period.

Key Takeaways for Employers

This decision provides welcome clarity for employers defending wrongful dismissal claims.

The Court of Appeal’s message is straightforward: courts will generally deduct all employment income earned during the notice period, regardless of whether the new role is comparable in status, compensation or prestige. The focus is on the actual earnings and not the perceived quality of the role.

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