Job offer from successor employer before termination not opportunity to mitigate

'The offer should have still been available… after termination formally happened'

Job offer from successor employer before termination not opportunity to mitigate

A warehouse worker who was terminated after declining a job offer with a successor employer is entitled to 12 months’ pay in lieu of notice, an Ontario court has ruled.

Much of the employer’s problem stemmed from communication, along with the timing of the successor’s offer and the termination, according to Ioana Pantis, an employment and labour lawyer at McMillan LLP in Toronto.

“There's a high onus on employers to appropriately plan and communicate a transition or a sale of business to their employees,” says Pantis. “In conjunction with this, if an employer believes an offer of employment is comparable, it's important to document this - put the employee on notice that their failure to accept the offer will result in the employer arguing that the employee failed to mitigate their damages.”

The 51-year-old worker joined LG Electronics Canada, the Toronto-based subsidiary of the multinational electronics company, as a warehouse packer in 2006 through a temporary employment agency. LG hired him as a full-time employee in September 2007 and the worker was eventually promoted to the role of team lead for parts return.

The worker was originally from India and his job with LG was his first in Canada. His compensation included group medical benefits, six days of paid sick leave, and a five-per-cent bonus based on performance.

Transition to successor employer

At the start of 2021, LG announced to employees its plan to outsource the warehouse to a contractor called Pantos. Employees were told that they would be offered equivalent terms of employment by Pantos and they would be able to carry over their seniority.

On Jan. 11, Pantos sent the worker a formal job offer for warehouse team lead. The offer stated that it was not for any specific time of employment but was rather an “at-will employment relationship.” The worker was given until Feb. 5 to accept or decline the offer. The reference to “at-will” employment – the worker could be terminated at any time without severance pay – was later removed because it was unenforceable under Ontario law.

The worker was concerned about the offer, as there were some differences from his benefits with LG. He was also worried that Pantos was a small outsourcing company and his job wouldn’t be secure, and Pantos’ communication style rubbed him the wrong way.

The worker declined the job offer from Pantos on Feb. 10, as he didn’t receive any assurances from LG that Pantos would give him the same job security. He also hoped that he could find another position with LG.

Once the worker declined the offer, Pantos hired a replacement. On March 12, LG officially terminated the worker’s employment, stopping his benefits coverage immediately and paying him severance pay.

No comparable employment

The worker wasn’t able to find similar employment until May 2022, when he started a six-month contract as a warehouse inventory specialist with no benefits. His job search was hampered by the fact that his education in India had little value without Canadian experience, as he applied for several comparable positions and received four job interviews, with no success.

The worker sued LG for wrongful dismissal. LG countered that the worker failed to mitigate his damages by turning down the position with Pantos.

The court accepted that the worker felt loyalty to LG, the only Canadian employer for whom he had worked, and he was concerned about his job security with Pantos. The court noted that the Pantos offer wasn’t identical to the worker’s employment with LG, as the benefits were different and there were questions over the “at-will” employment reference, which was later changed.

Regardless, the court found that the worker’s duty to mitigate was not engaged by the Pantos offer because it was made and withdrawn before the worker’s actual termination in March 2021. The worker hadn’t yet suffered any damages from termination because his employment hadn’t yet been terminated, the court said.

In addition, the court noted that worker received and rejected the offer on different terms, as it was before his termination. Once the worker’s employment was terminated, the position had been filled and he had no opportunity to change his mind and mitigate his damages, said the court.

No opportunity to mitigate after dismissal

The timing of the worker’s termination of employment was a technical failure on LG’s part, but an important one, according to Pantis.

“It's great that LG had good intentions and notified employees about the intended outsourcing in early January 2021, but the actual termination of employment happened a couple of months later in March,” she says. “And, by that time, the employee had already declined the Pantos offer and that offer was no longer available to him because Pantos hired a replacement.”

“I think it would have changed things to the advantage of [LG] if Pantos had kept the offer open and it was still available for the employee to accept,” adds Pantis. “The main feature was that the offer should have still been available for the employee to accept after termination formally happened.”

The court also found that the worker was able to show that he adequately tried to mitigate his damages by applying for several jobs. The job he ended up accepting was a less-desirable contract position that was the best he could do, the court said.

Given that the worker made reasonable efforts to mitigate his damages, he was entitled to reasonable notice of dismissal, the court said. The court considered his age of 49 at the time of dismissal and his more than 13 years of service with LG. While the worker’s position of team lead had some supervisory duties, it wasn’t a truly supervisory position as no employees reported directly to him, the court said.

Lack of comparable work bumped up notice period

The court gave significant weight to the fact that the economic changes from the pandemic at the time of dismissal likely hurt the worker’s job search, as evidenced by the worker’s difficulties in finding comparable work. The court settled on a notice entitlement of 12 months beginning from the date of termination.

The worker’s 13-plus years of service was an important factor, but the worker’s job search and history were key to the 12-month notice determination, according to Pantis.

“The court recognized the extensive job search efforts the employee made with no success and, while not expressly stated, I think that, implicitly, the judge took note that the employee only had one job since he came to Canada, which was his job with LG,” she says. “This could have made it harder for him to get another job, along with the economic impact of the COVID 19 pandemic - factors the court considered to increase the notice period.”

Although the worker claimed punitive damages, the court found nothing in LG’s conduct in handling the worker’s concerns and the transition that could be considered bad faith.

LG was ordered to pay the worker 12 months’ salary and benefits, minus the severance pay already paid to him at termination.

LG could have made matters easier by formally communicating the worker’s termination as soon as possible and before the new job offer was extended to the worker, says Pantis.

“It sounds like [LG] did a good job of informally communicating with the employee several times about his concerns with the offer, and even the court noted that both LG and Pantos were respectful to the employee,” she says. “But the issue was that there was no formal termination until after the Pantos offer was gone and it was too late for the employee to reconsider it.”

LG could have also communicated better with Pantos as part of the transition, says Pantis.

“[LG] could have communicated with the outsourcing company to try to ensure that the job offer was comparable and looked fair to the employee from the outset,” she says. “Making sure that the termination clause issue complied with employment standards legislation - and not using the American ‘at-will’ version that is a violation of Ontario’s ESA - and then also ensuring the compensation and benefits of the offer were comparable, the worker would have had a much harder time arguing that he shouldn't have taken the job.”

See Giduturi v. LG Electronics Canada Inc., 2023 ONSC 5476.

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