Is an Employee's Refusal to Accept a Settlement Offer a Failure to Mitigate?

In AMEC Americas Limited v. MacWilliams, 2012 NBCA 46, the New Brunswick Court of Appeal held that an employer’s defence that an employee failed to mitigate his damages by refusing to accept its settlement offers had no merit. As leave to appeal the decision was recently refused by the Supreme Court of Canada, the current answer to our question (at least in New Brunswick) is “no.”

In the case, the employer appealed from a decision granting the employee summary judgment in its wrongful dismissal action. The judge hearing the summary judgment motion rejected AMEC’s defence that the employee’s refusal to accept its settlement offers foreclosed his ability to recover damages based on a failure to mitigate. The New Brunswick Court of Appeal upheld the decision. It found that the defence was not a legally recognized basis for a denial of liability. In coming to this decision, the Court observed that evidence of a settlement offer is almost invariably used to substantiate the employer’s liability rather than to absolve the employer of the obligation to pay damages.

The Court noted that the settlement offers required the employee to execute a full and final release, and the conditions attached to the offers were "fertile grounds for further disputes and litigation." The Court further noted the offers did not measure up to the employee’s legal entitlement. The employer’s highest offer was 16 months’ notice, whereas the motion judge awarded the employee 20 months. Therefore, the Court of Appeal held that the motion judge did not err in rejecting the employer’s defence that the employee’s refusal to accept the settlement offers constituted a failure to mitigate his damages.

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This Cox & Palmer publication is intended to provide information of a general nature only and not legal advice.