Refusing Lesser Job from Terminating Employer Not Failure to Mitigate :

In Fillmore v Hercules SLR Inc ( 2016 ONSC 4686 CanLII) , Justice Diamond had a situation where the plaintiff , at the time of termination , was offered a choice between termination and a demotion with a 20% pay cut ( to be implemented in 6 months ). The employee did not elect to take the demotion. The defendant argued that this constituted a failure to mitigate his damages. This is what the Court had to say:

Issue #2: Should the plaintiff’s damages be reduced by reason of his alleged failure to mitigate?

[17] On Thursday, August 20, 2015, the plaintiff was asked to meet with the defendant’s general manager, Randy Tollefson (“Tollefson”). The plaintiff sat down with Tollefson, who presented the plaintiff with two separate letters, both dated August 20, 2015.

[18] The first letter, marked “Without Prejudice”, advised the plaintiff, inter alia, as follows:

“Further to our conversation today, this letter confirms that upon review of our business operations, it has been determined that your services with the Company are no longer required. Your employment with Hercules SLR Inc. is being terminated on Monday, August 24, 2015 without cause.”

[19] Accordingly, the plaintiff’s employment as Director (Purchasing) would be terminated the following Monday. The first letter further advised that the defendant would provide him eight weeks’ written notice in accordance with the requirements of the Employment Standards Act, 2000, S.O. 2000, C. 41, and offered the plaintiff an additional payment of 12 weeks’ severance in exchange for the plaintiff executing and returning a Full and Final Release no later than Friday, August 28, 2015 (the “Severance Offer”).

[20] The plaintiff also received a second letter dated August 20, 2015. In that second letter, the plaintiff was offered the “permanent, full time role of Supervisor Service”, with an expected start date of Monday, August 24, 2015. The salary for this new position would be $60,000.00 per annum (i.e. more than 20% less than his former salary). The defendant’s offer further provided the plaintiff with a six month income guarantee at his old salary to “assist him in the transition from current role to new role”. In other words, the defendant was prepared to maintain the plaintiff’s old salary for six months before the new salary would commence (the “New Employment Offer”).

[21] Both the Severance Offer and the New Employment Offer were open for acceptance until Monday, August 24, 2015. The plaintiff did not accept either offer by the defendant’s deadline.

[22] On Tuesday, August 25, 2015, the plaintiff sent an email to Laura Hubley (“Hubley”), the defendant’s Human Resources Generalist. The plaintiff asked for confirmation that the “termination letter is now in effect” and that “as of Monday, August 24 he was no longer employed with the defendant”.

[23] In response, Hubley delivered the following email to the plaintiff:

“This is to confirm our conversation this morning that as a result of a review of business operations and a restructuring initiative, your current role as Procurement Director has been eliminated as of August 24, 2015. On Thursday, August 20, you were presented with 2 options to consider.

The first option in the letter dated Thursday August 20, we have offered you a termination letter which outlined a severance package. This package includes a Full and Final Release Agreement with an expiry date of Friday, August 28, 2015. If you agree to the terms of the severance package and return the signed release agreement, we agree to pay you a severance package equal to 20 weeks of pay in a lump sum on the next regular pay date of September 3, 2015. If we do not receive the signed release agreement, we will pay you a lump sum of 8 weeks in accordance with Ontario Employment Standards.

The second option is to consider a job offer also dated August 20, 2015. If you accept the new job offer, your employment will continue with Hercules SLR Inc. To assist you in transitioning to the new role, we are offering you a 6 month income guarantee ending February 26, 2016.

If you decide not to accept the job offer, your employment with Hercules SLR Inc. ended on Monday. August 24, 2015. We have not had specific direction from you stating which option you prefer. Therefore, unless otherwise directed, we will proceed with termination.”

[24] The defendant submits that Hubley’s email renewed the expired New Offer of Employment to the plaintiff, and as such the plaintiff was offered a reasonable opportunity to mitigate his damages by returning to work for the defendant. The defendant thus submits that by not accepting the New Offer of Employment, the plaintiff failed to discharge his duty to mitigate his damages. For clarity, I note that the defendant is not challenging any of the plaintiff’s other mitigation efforts (or lack thereof) on this motion. The defendant’s position is that the plaintiff failed to mitigate his damages solely by reason of his refusal to accept the New Offer of Employment.

[25] As held by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31 (2008) 2008 SCC 20 (CanLII), S.C.J. No. 20, in some circumstances it may be necessary for a dismissed employee to mitigate his/her damages by returning to work for the same employer. As wrongful dismissal damages are intended to compensate for the lack of reasonable notice, in the absence of the employee facing a potential hostile atmosphere, embarrassment or humiliation, the Court may require the employee to mitigate his/her damages by “taking temporary work with the dismissing employer” (my emphasis in bold).

[26] The plaintiff relies upon the decision of the Court of Appeal for Ontario in Farwell v. Citair, Inc. 2014 ONCA 177 (CanLII), and specifically the following extract:

“To paraphrase Evans, the appellant’s mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the appellant that he was treating the reorganization as constructive and wrongful dismissal.”

[27] Both of the offers presented to the plaintiff were set to expire on Monday, August 24, 2015, being the date the plaintiff’s position with the defendant was being terminated. The New Offer of Employment is not an offer to work through the notice period (which the defendant originally suggested was 20 weeks). The nature of the New Offer of Employment was not time restricted or limited. It was a new, full time position with the defendant.

[28] The Farwell decision obliges the defendant to offer the plaintiff the “clear opportunity to work out the notice period” after the plaintiff refuses to accept the new, lesser position. I do not view Hubley’s email as being consistent with Farwell. Hubley’s email seems to keep both the Severance Offer and the New Offer of Employment on the table even though the plaintiff’s employment as Director (Purchasing) was “eliminated” the previous day. The New Offer of Employment does not trigger the duty to mitigate as discussed in Evans and particularized in Farwell; rather, it was an offer to accept a demotion.

[29] The defendant further submits that even if the New Offer of Employment failed to comply with Evans or Farwell, it was nevertheless a reasonable offer of employment which the plaintiff ought not to have refused in the circumstances. I disagree. Had the exact same offer been presented to the plaintiff by a third party employer during the notice period, and even assuming the terms of that third party employer’s offer were reasonable enough for the plaintiff to accept, as the offer included a lesser salary than the plaintiff should have received from the defendant during the notice period, the plaintiff could still look to the defendant for compensation for that missing amount. In other words, had the plaintiff accepted such an offer from a third party employer, he could still seek compensation from the defendant for the difference between his new salary and his old salary during the notice period.

[30] The defendant’s New Offer of Employment invites the plaintiff to become the “permanent, full time Supervisor Service” at a lesser salary going forward with no end date. Unlike traditional offers from dismissing employers that the employee work through the notice period, the New Offer of Employment required the plaintiff to accept the terms of the new position “as is”. There is nothing in the second letter which confirms that the potential acceptance of the New Offer of Employment would be without prejudice to the plaintiff’s rights arising from his dismissal from his former position.

[31] Had he accepted the New Offer of Employment, the defendant would likely have argued that the plaintiff condoned his right to seek additional compensation. The proposed transitional six month salary guarantee could arguably amount to consideration in exchange for a waiver of the plaintiff’s rights arising from his dismissal. There is no obligation on the plaintiff to effectively risk handing the defendant a Full and Final Release through the back door and under the guise of mitigation efforts.

On the other hand had the Employer told the Plaintiff that his job would be eliminated  6 months in the future but that if he wanted to stay on after that at a reduced position and salary, then the employer would have received credit for the 6 months working notice, whether the employee worked it or not. Moreover after 6 months of looking for a comparable job, the employee may have been more inclined to take the lesser position than face the continued uncertainty of unemployment.

In my experience, having been terminated from one job, the next job that people obtain is very often of a lesser quality than the one from which they recently removed. This is especially true when the employee does not have the paper qualifications for the job that new employers insist upon even though they are perfectly capable of performing the job functions. For example, the Controller who never completed her CMA degree.

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