Wrongful Dismissal: When will a Refusal to Return to Work Constitute a Failure to Mitigate?

Written by litigator and mediator Irvin Schein and originally published at irvinschein.com.  

The recent Ontario Superior Court decision of Fillmore v. Hercules SLR Inc. provides a useful summary of the current state of the law on offers of re-employment and a duty to mitigate.

The plaintiff had been employed as the defendants’ Director (Purchasing), with an annual salary of approximately $80,000, together with benefits.

He was fired without cause after having been employed for over 19 years.

The plaintiff sued and the matter proceeded by way of motion for summary judgment.

As there was no signed Employment Agreement, the Court assessed reasonable notice with reference to the usual factors, including the plaintiff’s age, length of service, character of his employment and the availability of similar employment.  The Court found that the appropriate period of reasonable notice was 17 months.

Complicating the matter was the fact that when the plaintiff was presented with a letter terminating his employment, he was given a second letter offering him the “permanent full-time role of Supervisor of Service” at a salary of $60,000 per annum, with his previous salary being maintained for a period of six months “to assist him in the transition from the current role to the new role”.

The plaintiff declined the offer of new employment at the lower salary.

At the motion, the defendant argued that the plaintiff had been offered a reasonable opportunity to mitigate his damages by returning to work for the defendant and that by failing to accept that offer, he had failed to discharge his duty to mitigate his damages.

The Court began its analysis by referring to the decision in the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31, where the Court held that in some circumstances, it may be necessary for a dismissed employee to mitigate damages by returning to work for the same employer.  It was suggested that in the absence of the employee facing a potential hostile atmosphere, embarrassment or humiliation, he may have to mitigate by “taking temporary work” with the dismissing employer.

In this case, the defendant simply provided the plaintiff with an offer to accept a demotion.

The Court observed that had the offer of the lower position been presented by a third party employer during the notice period, and had the plaintiff chosen to accept it, the plaintiff could have still looked to the dismissing employer for compensation for the difference between his previous salary and his new salary.  In this case, the dismissing employer’s offer made no reference whatsoever to compensation for that difference or to the idea that the plaintiff could accept the demotion and still pursue a claim for that difference.

Accordingly, the Court held that the plaintiff did not fail to mitigate his damages by refusing the new offer of employment.

This analysis gives rise to an interesting, but unanswered question.  What if the plaintiff had responded to the new offer of employment by suggesting that he would accept it provided that he was doing so without prejudice to his right to make a claim for the difference in salary for what would ultimately be determined by a Court to be a reasonable period of notice?  If he had done so, and the employer refused to accept that condition, in my view that would have put an end to the question of any possible failure to mitigate.  For dismissed employees being offered new employment at a reduced salary, that might be a prudent course of action to take.

The fact is that there are not an abundance of guidelines around this issue.  To a very significant extent, the question of whether or not to fault a dismissed employee for not accepting a new offer of employment is within the discretion of the judge.  While the Supreme Court of Canada has made reference to factors such as embarrassment and humiliation, that does not necessarily end the matter.  While there is much to be said for leaving it to the Court’s discretion, the lack of predictability inherent with that approach means that both sides have to give the issue very careful thought.