by Ozlem Yucel
Employees who have been wrongfully dismissed have a duty to mitigate their losses. This duty requires an employee to make reasonable efforts to look for another job after their termination. If the employee fails to do so, a court could reduce the compensation they may have otherwise received from their former employer.
But what happens when the employee’s former employer is the one offering them the new job? Is the employee required to accept the offer to fulfill their duty to mitigate?
This is a situation that may be difficult to envision for many employees. However, the case law confirms that, in some cases, the employee’s duty to mitigate may require a dismissed employee to return to work for the same employer.
In Evans v. Teamsters Local Union No. 31, 2008 SCC 20, the Supreme Court of Canada held that, where an employee’s former employer invites them to return to work on a temporary basis, the employee will be required to accept the offer as long as it is reasonable to do so. It would be reasonable to do so where the salary offered is the same, the working conditions are not substantially different, the work is not demeaning, and the relationships involved are not acrimonious.
In the recent case of Fillmore v. Hercules SLR Inc., 2017 ONCA 280, however, an employee who refused to return to work, had not failed to mitigate his damages.
Fillmore v. Hercules SLR Inc.
In Fillmore v. Hercules SLR Inc., a 51-year-old Director of Purchasing was terminated after 19 years of service. Upon termination, the employer provided the employee with two letters. The first letter confirmed that his position was being eliminated along with an offer of severance (in exchange for the employee signing a release). The second letter was an offer for the employee to return to work, the following day, in the new role of Supervisor. The new role was an indefinite term position. It was also a demotion that involved a 20% pay cut. If the employee accepted the position, the employer agreed to pay him his former salary for the first six months.
The day after receiving these two letters, the employee contacted his employer to confirm whether he had been terminated. The employer confirmed that, if he did not accept the Supervisor role, he was being dismissed.
The employee did not accept either offer. He sued the employer for wrongful dismissal. The case proceeded by way of summary judgment and was recently heard by the Court of Appeal.
i. Summary Judgment
There were two issues before the judge hearing the motion for summary judgment. The first was how much notice of termination was owing to the employee. The second issue was whether the employee, by refusing to accept the Supervisor position, failed to mitigate his damages.
On the issue of notice, the court awarded the employee a notice period of 17 months. The parties had not signed a written employment contract and, thus, the employee’s entitlements were governed by the common law. Given the employee’s age, tenure, position and prospects of re-employment, the court found that a 17 months’ notice period was reasonable in the circumstances.
On the issue of mitigation, the court held that the employee had not failed to mitigate his damages. The offer had not been extended to the employee following his termination. Thus, the employee’s duty to mitigate had not yet been triggered. The court relied on the case of Farwell v. Citair Inc., 2014 ONCA 177 (CanLII) in coming to this conclusion. In Farwell v. Citair Inc., the Court of Appeal held that an employee’s duty to mitigate is only triggered if the offer of new employment is clear and extended to the employee after their termination.
Even if the offer had been re-extended, the employee would not have been required to accept it. The offer was for an indefinite term position that involved a demotion and a 20% pay cut. It was not an offer to work throughout the notice period on similar terms as the employee’s former role. Thus, it would not have been reasonable for him to accept the offer.
Furthermore, the offer was tied to the offer of severance, which required the employee to sign a release. Thus, by accepting the new role, the employee would have to forfeit his right to pursue his entitlements following his wrongful dismissal.
Given the above, the court concluded that it was not reasonable for the employee to accept the Supervisor role and, in refusing to do so, the employee had not failed to mitigate his damages. He was awarded a reasonable notice period of 17 months, without deduction on account of mitigation.
ii. Court of Appeal Decision
The employer appealed the decision on the issue of mitigation (it did not take issue with the notice period awarded). It argued that the employee’s duty to mitigate obliged him to accept the Supervisor position and, in failing to do so, he had failed to mitigate his damages.
The Court of Appeal disagreed. It upheld the motion judge’s conclusion on the following grounds:
“[10] The motion judge concluded that the new offer of employment was not consistent with this court’s decision in Farwell because it was not an offer to work through the notice period. Instead, it was simply an offer for a new full time position at much less compensation. As the motion judge observed at para. 30:
There is nothing in the second letter which confirms that the potential acceptance of the New Offer of Employment would be without prejudice to the plaintiff’s rights arising from his dismissal from his former position.
The motion judge concluded, at paragraph 31:
There is no obligation on the plaintiff to effectively risk handing the defendant a Full and Final Release through the back door and under the guise of mitigation efforts.
[11] We agree.
[12] The relevant test from Evans was set by Bastarache J. at para. 30:
This Court has held that the employer bears the onus of demonstrating both that an employee has failed to make reasonable efforts to find work and that work could have been found (Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324). Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity
[13] The motion judge found that on the facts of this case a reasonable person in the respondent’s position is not obliged to accept a term risking waiver of the wrongful dismissal claim. We see no error in this finding.”
Lesson for Employees & Employers
The case of Fillmore v. Hercules SLR Inc. demonstrates that an employee’s failure to accept a new role with their former employer will not always mean that the employee failed to mitigate their damages. The employee’s duty to mitigate is only triggered if the employer offers the employee work throughout the notice period and if that offer is extended to the employee after their termination.
If you are an employee or an employer and have questions about mitigation, consult with a lawyer at Turnpenney Milne LLP today.