McDonald’s Franchisee Loses on Appeal

In our summer 2016 issue, we discussed an appeal underway in Brake v PJ-M2R Restaurant Inc. The central issues were whether the Employer, a McDonald’s franchise, had cause to dismiss the Plaintiff, Ms. Brake, and whether her mitigation income ought to have been offset against her damages award. On May 23, 2017, the Court of Appeal sided with Ms. Brake and dismissed the Employer’s appeal.

To recap, Ms. Brake, a 20-year managerial employee, was put on McDonald’s progressive discipline program and ultimately told that she failed the program and had to “take a demotion or go.” Ms. Brake refused the demotion and was dismissed for cause. Ms. Brake brought suit for constructive dismissal and was ultimately awarded 20 months’ pay in lieu (a tidy sum totalling $104,499.33).

Among other grounds of appeal, the Employer argued that that the income Ms. Brake earned working at a grocery store and a hardware store should have been deducted as mitigation from the damages award.  The Court of Appeal rejected this submission. Firstly, the Court found that since Ms. Brake was working at Sobey’s during her time at McDonald’s, she would have continued to earn income from Sobey’s even if she had not been dismissed. Secondly, as mitigation monies are meant to be a substitute for work with the Defendant employer, Ms. Brake’s income from the grocery store was so minimal that it did not rise high enough so as to be seen as a substitute for her work with the Defendant Employer. Finally, with regard to a sum of $600 earned at the hardware store, the Court found that the evidence was not clear with respect to this income and the Court declined to deduct it from the damages award.

Employees in a wrongful dismissal action are required to mitigate their damages. These monies are then deducted from a damages award. However, monies earned will only constitute mitigation if they can reasonably be considered a substitute for income from the Defendant Employer. In this case, it is clear that the Court ought not to have deducted the money earned from Sobey’s because the Plaintiff was in Sobey’s employ during her tenure with the Defendant. With regard to the Home Depot earnings, we are of the view that the Court’s decision not to deduct the $600.00 was very likely an expression of its disapproval of the Employer’s conduct; as opposed to a true reflection of the state of the law in Ontario.