The British Columbia Supreme Court slashed a lower court’s wrongful dismissal award because the judge made a mistake in determining whether the employee had adequately mitigated his damages by looking for alternative employment during the notice period.
The case involved Stuart Coutts, a Ferrari sales manager in Vancouver who was terminated after more than four years on the job. His employer, Brian Jessel Sports Car Inc., let him go when it decided to close its Ferrari division.
At the time of termination Coutts was 34. For most of his working life he had been employed as a car salesperson. He left school without completing Grade 12. He began working for the dealership in the fall of 1998.
His time at the dealership was lucrative. While his title was sales manager, nobody reported to him. He reported to the general manager who in turn reported to Brian Jessel, the principal owner of the dealership.
In 1999, his first full year at the dealership, Coutts earned $165,949.53. He went on to earn:
•$206,565.98 in 2000;
•$300,587.32 in 2001; and
•$282,763.81 in 2002.
In the first five months of 2003, before the dealership closed, he earned more than $100,000.
The decision to close the Ferrari division
On March 10, 2003, Coutts was told in writing that the dealership would close its Ferrari division and that his employment would be terminated on May 20, 2003.
He was given working notice of 11 weeks plus seven weeks salary in lieu of notice for a total of 18 weeks. The letter of termination contained the following provision:
“Brian Jessel Ferrari will allow you to remain with Jessel Ferrari for a further nine weeks ending May 20, 2003. During that period Jessel Ferrari will pay you full commission on any new Ferrari delivered up to and including May 20, 2003. We estimate that between now until May 20, 2003, you will receive commissions in excess of $100,000.”
Around this time Jessel asked Coutts to keep the matter of the Ferrari division closing confidential since public knowledge of it could adversely affect sales. After receiving his termination notice, he continued to work at the dealership.
On May 12, 2003, he received another letter from Jessel stating the closure had been postponed a week to May 26 and he was given the option to work until that date. The extra week would increase the working notice and reduce the salary in lieu of notice in his severance package.
The letter also calculated the severance owed to Coutts. It said for his length of severance the period is 18 weeks, of which 11 would have been served as working notice. The remaining seven weeks were to be paid at $5,000 per week, totaling $35,000. It also said he would be paid a total of $2,100 commission on three outstanding deals.
Coutts accepted the terms of the letter and worked the extra week. The Ferrari division was closed on May 24. On May 29 he received a cheque for $37,100. He filed a suit for wrongful dismissal.
The lower court found in favour of Coutts and awarded him 30 weeks’ notice (or four-and-a-half months), of which 11 weeks was served as working notice. It said the notice period ended Oct. 5, 2003.
That court found he was entitled to $102,885 in damages as a result of his employer’s failure to provide reasonable notice, less the $35,000 it had already paid, for a net amount of $67,885. It also awarded more than $8,000 in outstanding commissions.
The employer appealed that ruling.
How Coutts looked for alternate employment
At trial, the dealer said Coutts had failed to mitigate his damages, arguing he did not take reasonable and necessary steps to find another job during the four-and-a-half month notice period.
It said there was suitable employment available to Coutts by at least July 2003, well within the notice period. Shortly after his departure, Coutts had interviews with two other high-end dealerships, neither of which sold Ferraris.
Coutts said neither of the jobs was viable. In the first case he said the dealer’s primary interest was in using Coutts to create a customer database for Lamborghinis. At no time was a job offer made, he said.
The second case involved a job selling Jaguars, something that would not be as lucrative as selling Ferraris. He said the dealer knew the job was not really appropriate, but that Coutts could have it if he was “stuck for money.”
Coutts said from late May 2003 to February 2004 he prepared and distributed copies of his resume, registered with an executive search firm, searched for work through his contacts in the industry and reviewed job postings on websites regularly.
His main interest seemed to be in finding employment with the new Ferrari dealership in Vancouver, something he thought would provide him with a similar income. In the fall of 2003 Ferrari awarded the new dealership to Brian Ross. Coutts got in touch with Ross and had a series of meetings with him, but nothing transpired. In early 2004 Ross hired another person for the job.
The main issue in this case: Mitigation
The B.C. Supreme Court said the main issue in this case was mitigation.
In any action for wrongful dismissal, an employee has a clear duty to mitigate his damages. The duty to mitigate is not a duty owed to an employer, rather it is a duty an employee owes to conduct himself as a reasonable person. In most cases this means the employee must take reasonable steps to find alternative employment upon dismissal, the B.C. Supreme Court said.
The lower court judge concluded Coutts did not have a duty to accept a position at less pay than he earned from his former employer. But the B.C. Supreme Court did not agree with that assessment.
“Personal preferences and career objectives are a consideration in deciding whether an employee is entitled to turn down alternative employment but they are not decisive,” the B.C. Supreme Court said. “The employee must still act reasonably.”
The court said Coutts did not act reasonably. Refusing to follow through with employment opportunities in the employee’s accustomed line of work — in this case the two other high-end dealerships he met with — is not reasonable, it said.
The fact Coutts pinned all his hopes on a new Ferrari dealership, one that didn’t even come into existence until 2004, was both unreasonable and unrealistic, the court said.
Therefore it reduced the notice period by five weeks from from Oct. 5, 2003, to Aug. 31, 2003, for a total notice period of 25 weeks.
Commissions were also an issue in this appeal. The lower court awarded $8,250 in unpaid commissions for cars that were sold, but not delivered, during Coutts’ time at the dealership.
The commissions — $6,250 for a Ferrari sold on May 23, 2003, and $2,000 for a Maserati sold on May 15, 2003 — were in dispute because the dealer said it was “industry practice” that commissions are earned only once the car is delivered.
But the B.C. Supreme Court said there was no merit in the employer’s argument. It said the lower court judge made clear findings that Coutts had earned the two commissions because the vehicles were sold while he was still an employee.
It upheld the award for commissions.
For more information see:
Coutts v. Brian Jessel Autosports Inc.
, 2005 CarswellBC 860, 2005 BCCA 224 (B.C. S.C.)
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