Independent Medical Examination and Duty to Mitigate

Overview

In the context of employment law, when an employee is wrongfully dismissed, they are entitled to damages in lieu of the reasonable notice period their employer failed to provide. However, the entitlement is not absolute. The common law “duty to mitigate” requires the employee to take reasonable steps to minimize their loss of income by seeking comparable employment during the notice period. If the employee secures a new job, their earnings from that job will be deducted from the damages the employer owes them. The purpose of this rule is to ensure that employees do not profit from their dismissal by collecting full damages without attempting to find new employment. If the employee fails to make reasonable efforts to mitigate and the employer can prove that suitable alternative employment was available, but the employee did not pursue it, the court may reduce the employee’s damages claim.

The duty to mitigate becomes particularly complex when an employee’s personal circumstances, such as a mental health condition, interfere with their ability to seek new work. This was seen in the recent decision of Marshall v. Mercantile Exchange Corporation (“Marshall”).

In Marshall, the Ontario Superior Court of Justice addressed the issue of whether an employee in a wrongful dismissal case could be ordered to undergo an independent medical examination (“IME”) after the employee claimed that he could not look for new work due to a mental health condition. This decision is significant for both employers and employees, as it highlights the circumstances in which courts may allow an IME to verify an employee’s claim that a mental health condition prevents them from mitigating their damages.

Lyndon Marshall, the plaintiff, had been employed as a courier for Mercantile Exchange Corporation for over 25 years, earning approximately $52,000 annually. He was 58 years old when the company terminated his employment due to the company’s closure of its internal delivery department. Upon termination, Marshall received 11 weeks of working notice and an additional six months of salary in lieu of notice of termination. However, Marshall claimed entitlement to 26 months of notice and asserted that he was unable to seek new employment because he was suffering from stress and depression related to his dismissal.

The company challenged Marshall’s claim that his poor mental health justified his failure to mitigate for such an extended period. The company requested that Marshall submit to an IME under rules governing court proceedings. The company noted that while it is not uncommon for employees to experience emotional difficulties following termination, the extended period of non-mitigation claimed by Marshall was unusual. The company sought to have the IME ordered, arguing that Marshall’s claim went well beyond the typical adjustment period courts allow employees to recover from the emotional impact of dismissal.

The court sided with the company, stating that Marshall had put his mental health in issue by claiming an inability to mitigate for a prolonged period. The court emphasized that the longest period recognized in case law where an employee was excused from mitigating due to mental health issues was 12 months. In this case, Marshall sought to extend that period to 26 months, a position the court found unusual. The court ruled that if Marshall continued to claim that his mental health prevented him from mitigating beyond 12 months, he should be required to submit to an IME to verify his condition.

The decision balanced two key considerations. On the one hand, the court acknowledged Marshall’s concern that allowing IMEs in wrongful dismissal cases could open the door for employers to use such requests as a tactic to undermine employees’ legitimate mental health claims. On the other hand, the court recognized the employer’s right to a fair defence, especially when faced with an unusually long period of alleged non-mitigation. The court concluded that it would be unfair to allow Marshall to assert a 26-month inability to mitigate without giving the company the opportunity to test this assertion through an IME.

This ruling clarifies that while courts are sympathetic to mental health issues that arise from termination, there are limits to how long an employee can claim an inability to mitigate without undergoing further scrutiny. In Marshall, the court set a critical threshold. If the plaintiff’s claimed inability to mitigate extended beyond 12 months, the employer could request an IME to verify whether the mental health condition prevented the employee from seeking new employment.

Takeaways

When mental health claims are made in wrongful dismissal cases, both employees and employers should be mindful of the legal and practical implications. Employers may have the right to request an IME to verify an employee’s extended inability to seek new employment, especially if mental health is cited as a barrier to mitigation. At the same time, employees should be aware that if they are making such claims, they may be required to provide supporting medical documentation. Both parties are encouraged to seek legal guidance to ensure they understand their rights and responsibilities in these complex situations, particularly when navigating issues surrounding mental health and mitigation.