In Pakozdi v. B & B Heavy Civil Construction Ltd., 2018 BCCA 23, the B.C. Court of Appeal has provided guidance on the law of mitigation in relation to income earned by dismissed employees from a side or second job following termination by the other employer.

The plaintiff in Pakozdi was a bid estimator in the construction industry. He had his own business as a private consultant. He began contracting with the defendant B & B Heavy Civil Construction Ltd. (“B&B”) as a bid estimator and, a short time later, joined B&B as an employee. With B&B’s knowledge, the plaintiff continued to provide consulting services to other companies. After a year’s employment, the plaintiff was terminated and given two weeks notice. He commenced an action for wrongful dismissal.

At trial, the judge found that the plaintiff was wrongfully dismissed and awarded him five months reasonable notice. The judge then added three months for what was characterized as the plaintiff’s vulnerability due to certain health issues, making a total of eight months. The judge then dismissed B&B’s argument that the plaintiff had mitigated his damages through his consulting work after termination. The evidence was that the plaintiff, after his termination, ramped up his consulting worked and earned significant income from it. B&B appealed.

The Court of Appeal allowed the appeal on two grounds. On the issue of reasonable notice, the Court of Appeal concluded the initial assessment of the judge of five months of reasonable notice was within the range of reasonableness for a short term employee in his 50s. However, the Court of Appeal rejected the idea that an employee’s worsened medical condition provides a basis for increasing the notice period, particularly where the employee did work for himself in that time period.

The Court of Appeal also found that the judge should have taken into account as mitigation the income the plaintiff received from his consulting services earned after termination. The Court observed that income earned from the second job that could have been earned had the employment from the first job continued was not replacement income, and therefore not mitigation. However, if an employee steps up his or her efforts and earns more from the second job after termination, those amounts are replacement income and therefore should be counted as mitigation.

Pakozdi provides a welcome clarification on the requirements of mitigation in wrongful dismissal cases. In particular, the Court’s decision provides a clear position that post-termination income will be properly considered mitigation of a loss if it can be shown to replace lost income. The Pakozdi case also reaffirms a now robust line of cases from the B.C. Court of Appeal confirming a limited notice period (no more than five or six months) for short term employees, even if they are older.