Corporate restructuring is often
accompanied by lawsuits by jilted employees claiming constructive
dismissal. In a recent case, the Ontario Court of Appeal
looked at the intersection between constructive dismissal and a
dismissed employee's duty to mitigate.
As part of a corporate
restructuring, the Plaintiff was reassigned to the position of
Purchasing Manager from his former position of VP Operations.
The Plaintiff had previously excelled in the position of Purchasing
Manager prior to being promoted. Although this change of
position did not entail virtually any change in the Plaintiff's
salary or working conditions, it did represent a loss of prestige
and a reduced role in the company.
The Plaintiff brought a claim for
wrongful dismissal, alleging that he was constructively
dismissed. At trial, the Court allowed his claim and he was
awarded 24 months' notice.
The Defendant appealed.
The Court of Appeal firmly upheld
the finding of constructive dismissal and the 24 month notice
On the question of mitigation, the
employer argued that in order to mitigate his damages, the
Plaintiff should have accepted the position of Purchasing Manager
for the duration of the notice period.
The employer relied on a case
called Evans v Teamsters which confirmed that a
constructively dismissed employee may be obligated to accept a
lesser job with their employer to mitigate while looking for
alternate employment, if a reasonable person would be expected to
do so. Failure to do so would be a breach of the
employee's duty to mitigate their damages. However, an
employee is not obligated to accept the lesser job if by doing so
they would be working in an atmosphere of hostility, embarrassment
The employer argued that none of
those factors were present. All of the employer's
witnesses spoke highly of the Plaintiff, particularly with respect
to his work as Purchasing Manager, and the evidence was that the
reorganization was entirely related to a shift in focus of the
company to a product line with which the Plaintiff was
unfamiliar. The entire process was not intended to stigmatize
The Court of Appeal indicated that
the defence had merit. However, they denied the appeal on the
ground that the employer failed to advise the employee –
after he rejected the unilateral demotion – that the position
remained available, even if only while he looked for work
What Employers Should Know
The cases in which the principle
outlined in Evans is applicable are narrow.
However, it is essential that employers make it clear to an
employee who rejects the change (whether it is a demotion or
otherwise) that the position remains available. Otherwise,
the employee cannot be held to have failed to mitigate by failing
to accept it.
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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