Canada: A Fired Employee’s Obligation To Mitigate Damages Is An Obligation Of Means

In a decision handed down on May 30, 2013,1 the Quebec Court of Appeal repeats the principle that the obligation of an employee who has been wrongfully dismissed to mitigate damages is an obligation of means that must be assessed based on individual circumstances. If the employee were required to take every imaginable step to find another job, the obligation would be one of result.

The Court also observed that the obligation to mitigate damages does not mean that the employee has to accept the employer's offer of alternative employment regardless of the circumstances.

The facts

Upon returning to work at a car dealership in September 2004 following sick leave, a sales manager with 20 years of service found another employee occupying his office. The employer gave him the following options: stay on sick leave or accept a job as a sales representative or clerical work.

Given these alternatives, the employee claimed termination pay. The employer refused and instead offered him a lower-ranking job as manager of fixed operations, but with the same pay. A few days later, the employer changed its offer, reducing the salary and changing the work schedule. The employee refused and sued the employer on grounds of constructive dismissal.

In October 2005, the employee found a job as a sales representative at another dealership.

Judgment in first instance

The trial judge found that the dismissal was a constructive dismissal and awarded the employee 12 months' indemnity in lieu of prior notice.

As regards the obligation of the employee to mitigate damages, the trial judge found that the employee did not have to accept the employer's modified offer of employment following his dismissal, as continuing the employment relationship would, in the judge's own words, have required the employee "to work in a hostile, embarrassing or humiliating atmosphere."2

The trial judge found, however, that in the circumstances, the employee did not mitigate his damages because he undertook his job search late and was not sufficiently diligent. In support of this finding, the judge cited the following 5 facts: (1) he waited for just over 2 months before starting his job search; (2) he limited his search to sending about 20 résumés with telephone follow-up; (3) he did not make use of his contacts in the industry; (4) he limited his job search to the immediate vicinity of his home; and (5) he didn't find a job as quickly as a sales representative who resigned during the same period.3 The judge accordingly reduced the 12 months' indemnity to 6 months.

In light of the employer's clear bad faith at the time of the dismissal, the Court awarded the employee moral damages of $5,000.

Each of the parties appealed the judgment so that except for the finding of constructive dismissal, almost all of the findings of the trial judge were contested.

The Court of Appeal's decision

The Court of Appeal's analysis revolves around the extent of an employee's obligation to mitigate damages. The Court recalled that there are two parts to such an obligation: (1) make a reasonable effort to find another job; and (2) not refuse offers of employment that are reasonable in the circumstances.4

In this case, the Court of Appeal considered that the trial judge was correct in finding that, considering the specific circumstances of the matter, the employee was justified in refusing his former employer's offer of employment. The Court of Appeal pointed out that the test is to evaluate what a reasonable person would do in the same circumstances. Having regard for the reduced salary and responsibilities associated with the position offered and the visible animosity between the parties when the employment relationship ended, the Court confirmed that the employee did not fail to discharge his obligation to mitigate damages by rejecting the job offer.

However, the Court considered that the trial judge erred in finding that the employee failed to mitigate his damages in his job search. The Court pointed out that the obligation to mitigate damages is an obligation of means and not of result, saying: "[...] the obligation to minimize damages is an obligation of means and not an obligation to take every imaginable means to achieve the result."

Thus, according to the Court of Appeal, the fact that the employee waited just over 2 months before starting his job search was not unreasonable given the time the employee needed to "[...] absorb the shock of dismissal and consider new career opportunities." Moreover, the holiday season was not the best time for a job search. Sending about 20 résumés was also reasonable, especially as most of them were followed up with a telephone call. The employee's decision to limit his job search to the vicinity of his home was also not unreasonable given his age and the fact that numerous dealerships were located in the area. The Court of Appeal disagreed with the trial judge regarding the employee's use of his contacts in the industry, since he found alternative employment through one of those contacts. The Court pointed out that the employee accepted a lower paid job in a different position, namely a job as a sales representative. Finally, the Court specified that the comparison with another employee who resigned was inappropriate since the circumstances of the latter's employment were quite different, as he was a sales representative and not a manager, he had been named best sales representative and he had resigned to take another job.

Thus, the Court reduced the 12 month indemnity awarded by the first judge by only 1 month.

Conclusion

Situations in which an employee must accept his employer's offer of alternative employment are relatively few and far between. This would apply in the case of a reorganization or a closure, i.e., situations where the relations between the parties are generally not embittered.

As for job searching, by this decision the Court of Appeal has introduced the equivalent of a waiting period before this obligation is imposed on the employee, to allow him to absorb the shock of dismissal. The length of such a period appears to depend on the employee's years of service, his age and the circumstances of the termination.

The Court of Appeal's liberal and generous interpretation of the obligation to mitigate damages gives food for thought: an employee could in certain circumstances restrict his job search to a limited area and limit the steps taken to sending about 20 résumés followed by telephone calls.  

Footnotes

1 Gareau (Le Groupe Gareau inc.) c. Brouillette, 2013 QCCA 969

2 Evans c. Teamsters Local Union N. 31, [2008] 1 SCR 661, 2008 CSC 20

3 par. 40.

4 Standard Radio inc. c. Doudeau, [1994] R.J.Q. 1782 (C.A.).

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