Comparable employment does not mean any employment

The test is whether a reasonable person in the employee’s position would have accepted the offer

Comparable employment does not mean any employment
In 2016, as part of an asset purchase agreement, Imperial Oil sold its retail business to Mac’s Convenience. Google Street View
Stuart Rudner

By Stuart Rudner and Anique Dublin

 

It is well-established that a dismissed employee has a duty to mitigate their damages by making reasonable efforts to find new employment. So what happens if they are offered new employment but decline to accept it?

 

In Dussault v. Imperial Oil Limited, the Ontario Court of Appeal recently held that despite the general rule, two employees did not fail to mitigate their damages by refusing to accept new offers of employment from the company that bought their employer, as the offered employment was not “comparable.” 

 

Background

 

In 2016, as part of an asset purchase agreement, Imperial Oil sold its retail business to Mac’s Convenience (owned and operated by Alimentation Couche-Tard). The agreement addressed the conditions of continuing employment offers as they pertained to Donald Dussault and Maryann Pugliese. Both employees were in managerial positions. Dussault was 63 years old and employed by Imperial for 39 years; Pugliese was 57 years old and employed by Imperial for 36 years.

 

The offers made to the employees included: 

 

  • guaranteed continuation of base salary for 18 months only, after which there was some suggestion that their compensation would be reduced
  • a significant reduction in benefits
  • their years of service with Imperial would not be recognized by Mac’s
  • a requirement to sign a release renouncing their right to bring any future action against Imperial.

 

Both employees rejected the offers from Mac’s and were subsequently dismissed by Imperial. As a result, they brought a claim against Imperial alleging wrongful dismissal and sought summary judgment.

In its defence, Imperial alleged that the employees had failed to mitigate their damages when they refused to accept Mac’s offers of employment. The motion judge disagreed, finding that the employees acted reasonably in refusing the offers from Mac’s because the terms of employment being offered were not sufficiently comparable to their previous positions with Imperial.

Both employees were awarded 26 months’ notice without deduction for the alleged failure to mitigate.

Imperial appealed the decision. Their main argument was that the motion judge erred in failing to find that the employees had not mitigated their damages by accepting comparable employment with Mac’s.

 

Appeal

 

The appeal was dismissed. The court confirmed the well-established principles that an employee must mitigate their losses by making all reasonable efforts to seek comparable employment, and that the employer has the burden of proving that the employee failed to mitigate.

 

Relying on the decision in Carter v 1657593 Ontario Inc., the court also concluded that “comparable employment” does not mean “any employment,” but is intended to refer to employment that is commensurate with the previous employment with respect to matters such as status, duties, hours and remuneration.

 

The court agreed with the motion judge that the employment offered by Mac’s was not comparable and that the employees acted reasonably in refusing to accept it. Accepting the offer from Mac’s would have resulted in an immediate, substantial reduction in benefits and after 18 months, a material drop in base salary.

Moreover, the employees would have to waive their statutory and common law entitlements arising out of their years of service with Imperial.

 

The court also held that the determination of whether an employee has mitigated their damages by accepting comparable employment is a “fact-driven inquiry.” The court concluded that the motion judge’s decision was rooted in the evidence and she was therefore entitled to deference on appeal. Accordingly, the appeal was dismissed. 

 

Takeaways

 

The Court of Appeal’s decision illustrates that even when continued employment is offered, the seller in an asset purchase agreement may still be liable if the employee reasonably refuses to accept employment with the purchaser.

 

This is an objective standard; the test is whether a reasonable person in the employee’s position would have accepted the offer. In determining whether the objective standard has been met, a court will consider both the non-tangible elements of the situation (for example, work atmosphere), as well as the tangible elements such as the nature and conditions of employment.

Anique Dublin is a law clerk and billing clerk at Rudner Law in Toronto. She can be reached at (416) 864-8505 or [email protected].

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