On March 7, 2014, the Ontario Court of Appeal released its
decision in Farwell v. Citair, Inc. (General Coach
Canada)(Farwell), shedding further light on the
circumstances in which a departing employee will be required to
mitigate damages by continuing to work in a new role with the
employer who terminated him.
This aspect of the duty to mitigate has raised many questions
since the release of the 2008 Supreme Court of Canada decision in
Evans v. Teamsters Local Union No. 31(Evans). That decision confirmed that an employee claiming
wrongful dismissal must mitigate his damages by continuing to work
for the same employer where such an opportunity is offered and
where the opportunity is one that a reasonable person would accept.
The critical element of this test is that an employee will not be
required to mitigate by continuing to work in an atmosphere of
hostility, embarrassment or humiliation. Where an employee
refuses an offer to continue working that is reasonable, they can
be found in breach of their duty to mitigate, putting their
entitlement to damages for wrongful dismissal at risk.
Farwell involved an employee who, at the age of 58 and
after 38 years of service, was transferred from the role of
Operations Manager/VP Operations to the role of Purchasing Manager
due to a corporate restructuring. Mr. Farwell did not accept the
new role and subsequently claimed that he had been constructively
dismissed. The employer later argued that Mr. Farwell was obliged
to accept the role of Purchasing Manager during the notice period
as part of his duty to mitigate.
The trial judge accepted that Mr. Farwell's diminished role
in the company had resulted in a significant change in his
responsibilities and duties and a loss of status and prestige, such
that he had been constructively dismissed. The notice period
was set at 24 months. The trial judge also dismissed the
employer's argument that Mr. Farwell had not mitigated his
damages because he declined the transfer role.
The Court of Appeal's Decision:
The Court of Appeal upheld the trial judge's decision in all
respects, focusing specifically on the issue of whether the
employee had failed to mitigate his damages by declining the
transfer offer and not continuing in the role of Purchasing Manager
during the notice period.
The Court of Appeal held that the employer had not properly
triggered the mitigation duty contemplated by Evans (i.e. the
requirement to accept an offer of continuing employment). To
trigger this duty, the employer was obliged to offer Mr. Farwell a
clear opportunity to continue to work during the notice period
after he declined the position of Purchasing Manager and claimed
constructive dismissal. In the absence of any evidence that the
employer had extended such an offer after the dismissal, Mr.
Farwell could not be found in breach of his mitigation obligations
by not continuing to work.
Farwell provides a further gloss on the circumstances in which
employers may rely on a breach of the duty to mitigate in
constructive dismissal cases where continuing employment may be an
option. In these cases, employers must ensure that a formal offer
of continued employment is made following the event which triggers
the constructive dismissal. In the absence of such an offer, the
employer will not be able to argue that a departing employee had an
obligation to continue to work in a new or changed role during the
notice period, and, by extension, that a breach of this duty would
justify a reduction in the employee's entitlement to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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