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Courts getting serious about duty to mitigate

Several recent decisions have seen employees penalized for failing to accept reasonable offers of new or alternative employment after they are dismissed

By Stuart Rudner

The duty to mitigate damages arising out of the termination of one’s employment has always existed. However, it has long been recognized that, in the vast majority of cases, the duty was virtually meaningless because the courts would require little more than a token effort on the part of an employee to satisfy their obligation.

Typically, it would only be in the rarest of cases — where the employee could not show they made any effort to find new work, and the employer was able to show such work was available — a court might penalize the employee by reducing the amount of pay in lieu of notice that was awarded. However, several recent cases suggest Canadian courts are taking a harder look at mitigation efforts and reducing awards significantly if they are found to be lacking.

In Ghanny v. 498326 Ontario Limited, the plaintiff was a service manager with 18 years of service at a Toyota dealership. His position was eliminated and he was offered a total of four months' notice and pay in lieu thereof.  However, he was also offered a similar position at a Suzuki dealership owned by the same company. The plaintiff refused this offer, and commenced his wrongful dismissal action. Although the court found the appropriate notice period would have been 14 months, it declined to award any damages as it found that he had completely failed to mitigate his damages by not accepting the offer made to him at the time of dismissal.

In a somewhat unusual case, the plaintiff in Chevalier v. Active Tire & Auto Centre Inc., was initially laid off but, after the plaintiff alleged constructive dismissal, the employer was advised by its counsel it did not have the right to lay him off. As a result, the employer took the unusual step of apologizing and inviting him to return to work in his previously held position. However, the plaintiff refused and continued with his court action. Ultimately, the judge concluded he should have returned to work and he entirely failed to mitigate his damages when he refused to do so. As a result, no damages were awarded.

Finally, a recent decision of the Superior Court of Quebec (Levy v. Standard Desk Inc.) involved a 75-year-old employee. When the plant was shut down, he was offered a position with a related entity in a different municipality. A shuttle service was even offered to make up for the extra travel. However, the plaintiff refused and sued. The court found that although the plaintiff would have been entitled to 14 months’ notice, he was obligated to seek new employment in the same manner a younger person would be, and his failure to do so resulted in denial of damages.

What this means for employers

Perhaps the recent trend is a result of the economic times and the fact people should be encouraged more strongly to accept reasonable offers of employment rather than pursue litigation or collect employment insurance. Regardless of the rationale, how can employers take advantage of this trend? 

First, you should proactively seek out evidence of available employment after you dismiss an employee. Review online and more traditional sources, and speak with your contacts within the industry in order to identify any jobs that the employee in question could potentially apply for.

When I am representing an employer that is faced or threatened with a wrongful dismissal claim, I ask them to provide this information to me, and I routinely forward the job postings to counsel for the plaintiff and “suggest” that their client might want to apply. If they don’t, this can be used against them in the course of litigation.

Even if the employee has not retained counsel, it is open to the former employer to forward potential jobs or opportunities to them, both in order to assist them and also to lay the groundwork for a potential defence of failure to mitigate.

In addition, if an organization is going to enter into a termination agreement, I often recommend  they avoid lump sum payments (unless they can agree upon a substantially discounted amount) in favour of salary and benefit continuance with a clawback in the event the employee gains new employment. The employer should then assist the employee in seeking new employment by providing a positive letter of reference (as appropriate), monitoring available jobs and even considering the provision of outplacement counsel. While this does involve some cost, if the employee is successful in obtaining new employment sooner, then the employer’s dismissal costs will be significantly reduced.

Finally, if there is a potential claim, or if an employee is currently receiving salary and benefit continuance, it is always wise to keep track of mitigation efforts in order to determine whether she has new employment. Among other things, you can monitor her LinkedIn profile.

It is often surprising how individuals that “forget” to report new employment to their former employer are quick to post the details online. If you discover they have mitigated their damages, and the termination agreement allows you to do so, you can then cut off or reduce the severance payments. Alternatively, if there is ongoing or subsequent litigation, you can rely upon the information that you have obtained in order to improve your negotiation and litigation position.

Stuart Rudner is a partner in the Labour & Employment Law Group of Miller Thomson LLP, a national law firm. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at 416.595.8672 srudner@millerthomson.com. You can also follow him on Twitter @CanadianHRLaw and join his Canadian Employment Law Group on LinkedIn.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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