When it comes to constructive dismissal, the duty to mitigate damages is a cloudy and inconsistent realm
Editor’s note: This is the third in a series of articles on constructive dismissal. The previous articles appeared in issues #399 and #400.
The last two articles in this series addressed ways in which employers can impose unilateral changes upon the employment relationship without incurring liability for constructive dismissal. Now it’s time to turn to an issue that has caused much controversy and confusion: whether an employee that has been constructively dismissed has to continue working at his job, or another job within the organization, in order to mitigate his damages.
It goes without saying that when a person’s employment has been terminated they have an obligation to mitigate damages. This includes making bona fide efforts to find new work and, when suitable work is available, accepting such employment. Failure to do so can result in a significant reduction in the damages to which he is entitled.
In the “usual” circumstances, an employee that has been terminated does not have the option of continuing to work for his current employer. However, what about an employee who is told that he is being demoted from sales manager to salesman? Or a salesman whose commission is cut from 50 per cent to 20 per cent?
He is likely to be found to have been constructively dismissed, unless his employer followed the procedures set out in the previous two articles in this series. But does he have to stay on until he finds alternative employment? If he doesn’t, has he failed to mitigate his damages?
On an intellectual or ideological level, this issue can prompt much debate. Many are of the view that a worker should not be forced to continue working with, or for, the people that have just unilaterally and sometimes drastically changed his employment contract. The underlying assumption is that returning to work would be demeaning to that person, and that forcing him to do so would be unfair. Others take the position that, like any other situation where a person’s employment has been terminated, the subject employee has a duty to mitigate his damages. The logical extension of this approach is that, in the context of constructive dismissal, a job is available to the employee and he should not be able to walk away from it without penalty.
In the past the predominant view of the judiciary was an employee should not be required to mitigate his damages by accepting a lesser position within the company. But the Ontario Court of Appeal addressed this issue in detail in Misfud v. MacMillan Bathurst Inc. The court held an employee’s entitlement to damages depends upon “whether he has taken reasonable steps to avoid their [damages] unreasonable accumulation” and the duty to mitigate applies to all wrongful dismissal cases, including constructive dismissal. The court went on to explain that:
“Where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious (as in this case), it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until he finds acceptable employment elsewhere.”
The Misfud case suggests that, in some circumstances, the employee will be required to remain with the company in order to mitigate damages. But they will not be required to in circumstances that would be demeaning or embarrassing, where the conditions of employment would be significantly different or where the relationships with people at the place of employment have deteriorated to the point where it is not reasonable to stay on.
The analysis of whether an employee must stay with the employer in order to mitigate damages must be done on a case-by-case basis. In Squires v. Stanley Hardware, the Ontario Court (General Division) found the plaintiff did not have to remain with his employer in order to mitigate his damages. Continuing with the employer would have required the employee to move from a non-unionized to a unionized position of less stature, accept a lesser amount of pay and work at a different physical location. Furthermore, he would have been working on different and unfamiliar machinery and would have been subject to a very different shift schedule.
Conversely, the Supreme Court of British Columbia held the duty to mitigate required the employee to stay on in Michaud v. RBC Dominion Securities despite the fact he was being demoted from regional manager to branch manager. Relevant factors included the fact the employee would have retained his position as a vice-president, his compensation would have been kept at the same level for a period of time, and relations with his superiors remained cordial.
The B.C. Court of Appeal confirmed this decision, referring to its previous decision in Farquhar v. Butler Brothers Supplies Ltd. in which it held that:
“The employee is not obliged to mitigate by working in an atmosphere of hostility, embarrassment, or humiliation. But once the employer is clearly told, by words or equivalent action, that the termination is accepted by the employee, then, if the employer continues to offer a position to the employee, and the position is such that a reasonable employee would accept it, if he were not counting on damages, then the duty to mitigate may require the employee to accept the position, on a temporary basis while he looks for other work, even if it is roughly his old position before the constructive dismissal.
“Such circumstances may not arise frequently. Very often the relationship between the employer and the employee will have become so frayed that a reasonable person would not expect both sides to work together again in harmony. But sometimes it would be unreasonable for the employee to decline to continue in employment through the period equal to reasonable notice, while he looks for other work.”
These statements confirm the law has evolved very similarly in that province as it has in Ontario. Unfortunately, they also confirm there is no hard and fast rule as to when an employee has to remain with the employer in order to mitigate his damages.
The leading cases provide guiding principles, some of which have been set out above. When dealing with specific factual situations, it is often possible to find case law with facts that are comparable. These can provide more meaningful guidance in specific situations. But the bottom line is that the issue of mitigation in the context of constructive dismissal remains a confusing area of law with vague and sometimes inconsistent decisions.
For more information see:
• Squires v. Stanley Hardware, 1991 CarswellOnt 927, 36 C.C.E.L. 265 (Ont. Gen. Div.)
• Michaud v. RBC Dominion Securities, 2001 CarswellBC 736 (B.C. S.C.)
• Farquhar v. Butler Brothers Supplies Ltd., 1988 CarswellBC 46 (B.C. C.A.)
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at [email protected].
The last two articles in this series addressed ways in which employers can impose unilateral changes upon the employment relationship without incurring liability for constructive dismissal. Now it’s time to turn to an issue that has caused much controversy and confusion: whether an employee that has been constructively dismissed has to continue working at his job, or another job within the organization, in order to mitigate his damages.
It goes without saying that when a person’s employment has been terminated they have an obligation to mitigate damages. This includes making bona fide efforts to find new work and, when suitable work is available, accepting such employment. Failure to do so can result in a significant reduction in the damages to which he is entitled.
In the “usual” circumstances, an employee that has been terminated does not have the option of continuing to work for his current employer. However, what about an employee who is told that he is being demoted from sales manager to salesman? Or a salesman whose commission is cut from 50 per cent to 20 per cent?
He is likely to be found to have been constructively dismissed, unless his employer followed the procedures set out in the previous two articles in this series. But does he have to stay on until he finds alternative employment? If he doesn’t, has he failed to mitigate his damages?
On an intellectual or ideological level, this issue can prompt much debate. Many are of the view that a worker should not be forced to continue working with, or for, the people that have just unilaterally and sometimes drastically changed his employment contract. The underlying assumption is that returning to work would be demeaning to that person, and that forcing him to do so would be unfair. Others take the position that, like any other situation where a person’s employment has been terminated, the subject employee has a duty to mitigate his damages. The logical extension of this approach is that, in the context of constructive dismissal, a job is available to the employee and he should not be able to walk away from it without penalty.
In the past the predominant view of the judiciary was an employee should not be required to mitigate his damages by accepting a lesser position within the company. But the Ontario Court of Appeal addressed this issue in detail in Misfud v. MacMillan Bathurst Inc. The court held an employee’s entitlement to damages depends upon “whether he has taken reasonable steps to avoid their [damages] unreasonable accumulation” and the duty to mitigate applies to all wrongful dismissal cases, including constructive dismissal. The court went on to explain that:
“Where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious (as in this case), it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until he finds acceptable employment elsewhere.”
The Misfud case suggests that, in some circumstances, the employee will be required to remain with the company in order to mitigate damages. But they will not be required to in circumstances that would be demeaning or embarrassing, where the conditions of employment would be significantly different or where the relationships with people at the place of employment have deteriorated to the point where it is not reasonable to stay on.
The analysis of whether an employee must stay with the employer in order to mitigate damages must be done on a case-by-case basis. In Squires v. Stanley Hardware, the Ontario Court (General Division) found the plaintiff did not have to remain with his employer in order to mitigate his damages. Continuing with the employer would have required the employee to move from a non-unionized to a unionized position of less stature, accept a lesser amount of pay and work at a different physical location. Furthermore, he would have been working on different and unfamiliar machinery and would have been subject to a very different shift schedule.
Conversely, the Supreme Court of British Columbia held the duty to mitigate required the employee to stay on in Michaud v. RBC Dominion Securities despite the fact he was being demoted from regional manager to branch manager. Relevant factors included the fact the employee would have retained his position as a vice-president, his compensation would have been kept at the same level for a period of time, and relations with his superiors remained cordial.
The B.C. Court of Appeal confirmed this decision, referring to its previous decision in Farquhar v. Butler Brothers Supplies Ltd. in which it held that:
“The employee is not obliged to mitigate by working in an atmosphere of hostility, embarrassment, or humiliation. But once the employer is clearly told, by words or equivalent action, that the termination is accepted by the employee, then, if the employer continues to offer a position to the employee, and the position is such that a reasonable employee would accept it, if he were not counting on damages, then the duty to mitigate may require the employee to accept the position, on a temporary basis while he looks for other work, even if it is roughly his old position before the constructive dismissal.
“Such circumstances may not arise frequently. Very often the relationship between the employer and the employee will have become so frayed that a reasonable person would not expect both sides to work together again in harmony. But sometimes it would be unreasonable for the employee to decline to continue in employment through the period equal to reasonable notice, while he looks for other work.”
These statements confirm the law has evolved very similarly in that province as it has in Ontario. Unfortunately, they also confirm there is no hard and fast rule as to when an employee has to remain with the employer in order to mitigate his damages.
The leading cases provide guiding principles, some of which have been set out above. When dealing with specific factual situations, it is often possible to find case law with facts that are comparable. These can provide more meaningful guidance in specific situations. But the bottom line is that the issue of mitigation in the context of constructive dismissal remains a confusing area of law with vague and sometimes inconsistent decisions.
For more information see:
• Squires v. Stanley Hardware, 1991 CarswellOnt 927, 36 C.C.E.L. 265 (Ont. Gen. Div.)
• Michaud v. RBC Dominion Securities, 2001 CarswellBC 736 (B.C. S.C.)
• Farquhar v. Butler Brothers Supplies Ltd., 1988 CarswellBC 46 (B.C. C.A.)
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at [email protected].
