'Everyone has a duty to mitigate their damages equally, regardless of age': lawyer
“A dismissed employee’s duty to mitigate isn’t just some niche argument that might be made in court – if someone doesn't mitigate their damages from termination, it can significantly undercut their wrongful dismissal damage claims.”
So says labour and employment lawyer Jennifer Singh Jenkins of McInnes Cooper in Halifax, after the Nova Scotia Supreme Court found that a 41-year employee was entitled to a 24-month notice period following the termination of his employment.
However, the court also concluded that the worker failed to mitigate his damages by rejecting two comparable job offers, leading to an almost total reduction of his damages.
The now-71-year-old worker was a bindery specialist for Bounty Print Limited, a printing company based in Halifax, since 1979. In late 2019, Bounty was purchased by a company that merged Bounty with another company under the business name “Rocket.”
A few months later, the COVID-19 pandemic hit, causing Bounty’s orders to drop by more than 70 per cent within a month. The company applied for a government workshare program and started making personal protective equipment, allowing it to keep all its employees working.
However, by the fall of 2021, Bounty realized that it would have to lay off employees to keep operating, as the workshare program had ended. Company shareholders determined that they would have to lay off six employees.
Selected for layoff
In January 2022, the worker was selected for layoff. The company’s HR manager sought legal advice and was told that an indefinite layoff constituted termination without cause and the company would be “on the hook” for the statutory notice periods.
On Jan. 14, the worker was called into a meeting and given a letter stating that his employment was terminated “due to the ongoing impact of the COVID-19 pandemic on our business.” There was no indication that there was a possibility of bringing him back if things improved and the worker was given eight weeks’ termination pay in accordance with the minimums in the Nova Scotia Labour Standards Code for employees with more than 10 years’ service.
The worker contacted a labour lawyer, who sent a demand letter to Bounty suggesting that the manner in which the termination pay was being paid was in violation of the code. The letter demanded a lump-sum payment of the worker’s pay, along with pension benefits and group benefit continuation for 24 months.
Bounty responded by saying that it “highly regarded” the worker and it hoped that it would “be in a position to recall him.” The company also stated that it was committed to continuing the worker’s statutory notice payments for the full eight weeks and to his recall if things worked out.
In February, the worker launched a wrongful dismissal action claiming a notice period between 28 and 30 months. The company maintained that the worker had been laid off, not terminated.
Comparable employment
On March 9, the company contacted the worker about another company in the area looking for an experienced bindery person. It offered to connect the worker with this company, but the worker declined, as the pay was only 81 per cent of his pay with Bounty and the commute was further and involved a toll bridge. Training would also be required as the job involved using a machine with which the worker wasn’t familiar.
In mid-March, Bounty wrote to the worker saying it was able to recall the worker to his previous position with the same terms and conditions, effective May 2. The worker’s legal counsel sought confirmation about: whether the worker would be paid any lost wages and benefits since his termination, if there was sufficient work for him, if the company wouldn’t make any unilateral changes to the conditions of employment, and if the company would pay his legal fees.
The company declined to pay the worker’s legal fees but said it would continue to employ the worker in good faith. It also offered a $1,000 contribution to the worker’s pension if he returned to work.
In early April, Bounty informed the worker that things had improved and it wanted to recall him sooner, but it received no response. The company tried again in late April and offered a bonus of $2,000 upon his return and another $3,000 three months later. However, the worker declined.
The court found there was no doubt that the worker’s employment was terminated on Jan. 14, 2022, entitling him to reasonable notice. The court noted the worker’s long service and age, alongside limited job prospects in his specialized field – he had a Grade 9 education and no experience with digital printing - as factors in awarding a 24-month notice period.
It also found that he was an experienced and well-respected bindery specialist at the time of his termination, but there were no exceptional circumstances that supported a notice period beyond the traditional maximum of 24 months.
“Generally, people often think about a layoff and a termination as two different things,” says Singh Jenkins. “But in employment law, a longer layoff - unless there's a specific provision in an employment contract that allows for a layoff - typically will be considered the same as a termination.”
Termination
The employer indicated that it intended to recall the employees back to work, but that didn't necessarily mean that it wasn't a termination triggering reasonable notice, adds Singh Jenkins.
However, the court noted that “a dismissed employee has a duty to make reasonable efforts to mitigate their damages, including seeking comparable employment.” The worker was offered a position with another company as well as an opportunity to return to his previous role at Bounty on the same terms and conditions.
The court found that the outside job offer, while not identical, was "comparable in status, hours, and remuneration to the work that [the worker] did with [Bounty]." The main differences were the lower salary, which at 81 per cent was still comparable, and the increased expense in getting to work, which wasn’t significant enough to make it reasonable to turn down the offer, said the court.
As for Bounty’s offer of re-employment, the evidence was that there was a positive working relationship and the worker was never shown any hostility, humiliation, or animosity from the company, the court said. While the worker was “understandably affected by the sudden loss of his job and his trust in [Bounty] changed after he was let go,” it wasn’t reasonable to refuse the opportunity without evidence that the employment relationship was irreparable, said the court, adding that Bounty offered $5,000 in bonuses and $1,000 towards his pension if the worker returned.
“Naturally, in any situation where an employee is terminated, there's going to be hurt feelings and an employee is not necessarily going to want to take back their previous position with the employer who fired them,” says Singh Jenkins. “But the test is whether or not they're going back into an atmosphere of hostility, embarrassment or humiliation - the court found that he wasn't walking into an embarrassing or humiliating situation, so he still had an obligation to accept that offer of re-employment with Bounty.”
Failure to mitigate
The court determined that the worker, by refusing both job offers, failed to mitigate his damages. As a result, the court limited his damages to $3,302.76, reflecting the difference between his potential earnings at the outside company and his previous salary, along with pension and health benefit losses up to May 2, 2022 - the date he was expected to return to work with Bounty. The worker was also entitled to recover reasonable legal fees incurred in accessing his pension after the company failed to provide a required statement of termination of employment.
“While the worker was entitled to 24 months’ reasonable notice, this was slashed to just a little over $3,000 after mitigation was taken into account,” says Singh Jenkins. “It's an interesting case because it shows that everyone has a duty to mitigate their damages equally, regardless of their age.”
The court rejected the worker’s claims for aggravated and punitive damages, finding no evidence of bad faith in how Bounty handled his termination. The company’s actions, such as paying statutory benefits over eight weeks instead of in a lump sum and considering the termination a layoff, were determined to be legitimate and not indicative of bad faith.
It’s a significant decision with regards to dismissed employees’ duty to mitigate, according to Singh Jenkins.
“When we're looking at an employee's obligation to accept comparable employment, which is part of the duty to mitigate, the meaning of comparable doesn’t mean exactly the same,” she says. “That's really important to note, especially as it relates to the lower salary that [the worker] would have been making if he had accepted that job with a third-party company.”
“The employment needs to be similar, not the same, and if someone doesn't accept similar employment to what they had, they’re not going to be considered to have met their duty [to mitigate].”
