Fired employee loses award by refusing return-to-work offer

Employer offered job back for balance of notice period after failed severance negotiations

When an employee is terminated, he has a duty to mitigate his damages by looking for another job. But what happens when the very employer that just showed him the door gives him the option to work out the notice period?

Most employees would likely reject such an idea, and many employers might not be jumping on that bandwagon either. But last month, the country’s top court upheld a ruling stating an employee in the Yukon had a responsibility to return to work with the employer that fired him in order to mitigate his wrongful dismissal damages. The fallout from the Supreme Court of Canada’s decision in Evans v. Teamsters Local Union No. 31 will have implications for wrongful dismissal and constructive dismissal cases for years to come.

Mitigation of damages is a cornerstone legal concept in wrongful dismissal cases and employment law in general. This notion is derived from the legal principle that a party is not entitled to recover for a loss that could reasonably have been avoided. In both constructive dismissal and wrongful dismissal, this principle obliges a terminated employee, or an employee who believes that he is being constructively dismissed, to take reasonable steps to secure alternative forms of employment in order to reduce financial loss.

Employee fired by new executive whom he opposed in elections

Donald Evans was terminated after 23 years as a business agent with Teamsters Local 31 in Whitehorse following a bitterly fought election of a new executive he opposed. In the termination letter, dated Jan. 2, 2003, the union said it was prepared to discuss his severance package. Evans began corresponding through his lawyer in an effort to reach a settlement. Meanwhile, the union continued to pay his salary and benefits.

Asked back after failed severance negotiations

On May 23, 2003, five months his termination, the union advised it couldn’t agree to his severance demands and asked him to return to work. He was to continue working for the balance of his notice period of 24 months. This meant that he would have to return to work after being fired, with the new executive he had opposed, until his notice period ended on Dec. 31, 2004. Evans refused to return and commenced an action for wrongful dismissal.

The Yukon Territory Supreme Court found Evans acted reasonably in refusing to return due to his concerns about how he would be treated. It awarded him 22 months’ notice — about $100,000. The union appealed.

The Yukon Court of Appeal set aside the award and found Evans had not acted reasonably by refusing the return-to-work offer and he failed to mitigate his damages. In a six-to-one ruling, the Supreme Court of Canada upheld the decision, finding Evans had not acted reasonably when he refused his employer’s request since the salary, working conditions and work were the same. The court also said the personal relationships involved weren’t beyond repair.

“In some circumstances it will be necessary for a dismissed employee to mitigate his damages by returning to work for the same employer,” the Supreme Court said. “Assuming there are no barriers to re-employment, it is consistent with the notion that damages are meant to compensate for lack of notice, and not penalize the employer for the dismissal.”

Justice Rosalie Abella dissented, noting the importance of considering the effects of job termination on employees.

“Firing an employee without notice, then requiring him to return temporarily to work at his former workplace because the unlawful dismissal resulted in bleak employment prospects has the perverse effect of requiring a wronged employee to ameliorate the wrongdoer’s damages,” said Justice Abella.

She said the return-to-work request had the “bizarre consequence of transforming a wrongful dismissal, attracting a substantial notice period, to a lawful one attracting none.”

Evans appears to contort the concept of mitigation and what the Supreme Court of Canada has always maintained about the vulnerability of the employee upon termination. It effectively provides employers with permission to recall a fired employee in the event they dislike the way negotiations are going.

No bearing on Wallace damages

However, the Supreme Court of Canada maintained an important principle relating to Wallace damages for bad faith terminations. Despite the fact Wallace damages were not awarded in this case, the Supreme Court made it abundantly clear Wallace damages are not subject to mitigation, a principle hinted at in previous cases but never clearly confirmed until now. This reinforces the concept of Wallace damages as punitive in nature. Evans confirms these types of damages will not have any deductions for failure to mitigate, as was typical before.

Ramifications for wrongful dismissals

For wrongful dismissals, Evans appears to contort the concept of mitigation, and contradicts what the Supreme Court of Canada has always maintained about the vulnerability of the employee upon termination. It effectively provides employers with permission to recall an employee who has been fired in the event the employer dislikes the manner in which negotiations are transpiring. The balance of power is with the employer, while the employee remains in a weaker position with no control over severance negotiations.

In the 1997 Wallace v. United Grain Growers ruling, Justice Frank Iacobucci said the point at which an employment relationship ruptures is the time when the employee is most vulnerable and most in need of protection. If the employee is most vulnerable when the employment relationship ends, then allowing him to be recalled after being fired creates a greater vulnerability. Not only is this principle applied in Evans inconsistent with the Supreme Court of Canada’s previous approach in employment law, it doesn’t consider the emotional and psychological impact of termination on the employee and his concerns about returning to work after being terminated.

Further, if the law aims to minimize the damages from dismissal, then creating a situation where the employee could be asked to return to a potentially hostile environment could lead to arguments of constructive dismissal and greater damages.

Evans shifts the balance of power to the employer and creates a potentially intimidating environment for the employee. Instead of negotiating on equal footing, the employee is more susceptible to the employer’s whim, given that at any minute negotiations may cease and the employer may recall the employee if it does not like the manner in which negotiations are progressing. This, as Justice Abella argued, flies in the face of the principles and recognition of the vulnerability of employees upon termination, a position the Supreme Court of Canada has consistently maintained in the past.

For more information see:

Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (S.C.C.).
Wallace v. United Grain Growers Ltd., 1997 CarswellMan 455 (S.C.C.).

Natalie MacDonald is a partner with Grosman, Grosman and Gale LLP, a Toronto firm which only specializes in employment law. She can be reached at (416) 364-9599 or nmacdonald@grosman.com.
The Supreme Court of Canada’s ruling on the return-to-work offer as mitigation

A selection from the Supreme Court of Canada’s ruling that the union’s offer of re-employment to Donald Evans constituted mitigation of reasonable notice damages:

“In some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer. Assuming there are no barriers to re-employment, requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. Not imposing such a requirement would create an artificial distinction between an employer who terminates and offers re-employment and one who gives notice of termination and offers working notice.

“Given that the terms of employment were the same, it was not objectively unreasonable for Evans to return to work to mitigate his damages.”
Justice Abella’s dissenting remarks from the Supreme Court’s majority decision

Justice Rosalie Abella's remarks contesting the majority ruling that it was reasonable to expect Donald Evans to accept the return-to-work offer as mitigation: “When an employee is fired without cause and without reasonable notice, the dismissal is, at law, ‘wrongful.’ The employee is immediately entitled to an action in damages. Such an employee should not be expected or required to mitigate any damages by remaining in the workplace from which he has been dismissed. To do so disregards the uniqueness of an employment contract as one of personal service.

“A purely objective test should not be applied in Evans’ decision not to return to the workplace from which he had been fired. Both objective and subjective factors are relevant in evaluating what a reasonable person in the position of the employee would do and whether a particular dismissed employee should be obliged to mitigate any damages by working in an atmosphere of hostility, embarrassment or humiliation. Different employees will be differently affected by a dismissal, and are entitled to consideration given to the reality of their own experience and reaction.

“The fact that employment opportunities for a 58-year-old former union business agent are limited in a small community is not Evans’ doing. He found himself in this difficult position because of his wrongful dismissal.
The paucity of alternate jobs does not entitle the Teamsters to dictate to Evans how to mitigate his damages. It may well be that an employee will be found not to have taken sufficient mitigating steps. But that is different from creating a presumption that if an employee like Evans has difficulty finding alternate employment, he will be obliged to work out his notice period with the employer who fired him.

“Firing an employee without notice, then requiring him to return temporarily to work at his former workplace because the unlawful dismissal resulted in bleak employment prospects, has the perverse effect of requiring a wronged employee to ameliorate the wrongdoer’s damages, rather than the other way around.”

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