July 29, 2014

Employee’s Obligation to Mitigate by Remaining with Terminating Employer

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The Ontario Court of Appeal recently released a decision (Farwell v. Citair, Inc, 2014 CarswellOnt 2573, 2014 ONCA 177) making it clear that if an employee rejects continued employment, and proceeds to assert a constructive dismissal claim, an employer must again offer the employee work to invoke the employee’s duty to mitigate with respect to that offer.

FACTS

General Coach Canada (the “Employer”) was in the business of manufacturing travel trailers, fifth wheels, truck campers and motor homes in Ontario for approximately 65 years. Due to a shift in the market beginning in the mid-2000’s, the Employer was forced to focus its operations on producing park model homes and pre-fabricated cabins.

Kenneth Farwell (“Farwell”) worked for the Employer for nearly 40 years, beginning in an entry level position and working his way up through the company. However, as the company’s business focus shifted, it became clear that Farwell’s skills in the area were lagging behind other employees. The Employer promoted Wayne Meidinger (“Meidinger”) into Farwell’s role, as they felt he had more expertise relating to the business’s new focus. Meidinger had previously reported to Farwell for many years.

The Employer offered Farwell his former position of Purchasing Manager, without loss of pay, a position for which they felt he was better suited for. Farwell informed his Employer that he would not accept the position and subsequently commenced an action for constructive dismissal.

DECISION

The Trial Judge determined Farwell had been constructively dismissed and fixed his damages at 24 months. The Trial Judge dismissed the Employer’s argument that Farwell was obliged to accept the new position in order to mitigate his damages, noting that it would have been humiliating and embarrassing for him to do so. The Employer appealed the decision.

On appeal, the Employer again argued that Farwell failed to mitigate his damages as he did not accept the position offered by the Employer, at least during the period of working notice. The Court of Appeal stated that when an employer offers an employee a chance to mitigate damages by returning to work, the question is whether a reasonable person would accept such an opportunity.

Much of the Employer’s argument was based on the Supreme Court of Canada’s decision of Evans v Teamsters Local Union No. 31, 2008 SCC 20. In that case the Supreme Court found that there is a duty on an employee to continue working in order to mitigate damages, under certain circumstances. The circumstances were set out in that decision as follows:

1. the salary oered is the same

2. the working conditions are not substantially dierent or the work demeaning;

3. the personal relationships involved are not acrimonious; and

4. the offer to return to work is for the reasonable notice period.

 

In the Evans decision The Supreme Court stated that a relevant consideration is whether the offer is made while the employee is still working or after the employee has left but did not elaborate on this point.

Most interestingly, the Court of Appeal found that in order to trigger the duty to mitigate, the Employer would have had to offer Farwell  another clear opportunity to work during the notice period after he refused to accept the new position (in essence, a second offer). The Court of Appeal stated at para 20 the following:

…the appellant's mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the Appellant that he was treating the reorganization as constructive and wrongful dismissal.

There was no evidence before the Court that the Employer had made this second offer and, as such, Farwell did not breach his mitigation obligation by not returning to work.

WHAT THIS MEANS TO EMPLOYERS

Be careful when restructuring. Significant changes in an employee’s job status, even if it doesn’t involve a pay cut, could result in a claim for constructive dismissal.

If appropriate in the circumstances, offer the employee a chance to mitigate his/her damages by accepting the modified and/or alternate position for the duration of the reasonable notice period. That offer must be made to the employee after he/she has rejected continued employment.

For more information, please contact Ryan Seymour at coxandpalmer.com.


Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.