It is well established that employees who are constructively dismissed may have a duty to mitigate their damages by remaining in the altered position for a period of time while they search for other employment. But what about an employee who is dismissed without cause and without notice, and then offered his or her job back for a temporary period? Last week, Canada's highest court ruled that an employee who was fired, then asked to come back to his old job, had a duty to accept that offer. In Evans v. Teamsters Local No. 311, the Supreme Court of Canada clarified both the application and scope of the employee's duty to mitigate.
The Facts
Donald Evans was employed for over 23 years as a business agent in the Teamsters' Whitehorse office. He was dismissed without cause and without notice after the election of a new union executive. Later the same day, the incoming Union president contacted him to "commence discussions." The next day, Evans' lawyer wrote to the Teamsters advising that he was entitled to reasonable notice of his termination, and suggested that he was prepared to accept 12 months of continued employment followed by 12 months' pay in lieu of notice. The parties discussed possible resolutions, but one was not reached. The Teamsters continued to pay Evans' salary and maintained his benefit coverage.
Approximately five months later, Evans received a letter from the Teamsters' counsel requesting that he "return to his employment&to serve out the balance of his notice period of 24 months." He refused. The issue before the court was whether Evans had acted reasonably in refusing to resume his former position in mitigation of his damages.
Lower Court Decisions
The trial Judge found no bad faith in the manner of Evans' dismissal. However, he also concluded that the termination letter had the effect of repudiating the employment contract and putting an end to it. As such, the trial Judge concluded that Evans was not required to return to a temporary position with his former employer.
The trial Judge reasoned that since Evans was an indefinite term employee, the Teamsters had an obligation to provide him with reasonable notice or pay in lieu thereof. Regarding his duty to mitigate, the trial Judge found that Evans had been prepared to resume his employment and return to his previous status as an indefinite term employee, but the Teamsters would not accede to his reasonable requests.
The Yukon Court of Appeal unanimously overturned the decision of the trial Judge, and found that Evans had a bona fide opportunity to return to his position as business agent in order to mitigate his damages. It was unreasonable for Mr. Evans to expect that his termination be rescinded. The evidence did not support the conclusion that Evans' circumstances, when viewed objectively, justified his refusal to resume employment with the Union. He had failed to mitigate his damages.
The Supreme Court Of Canada's Findings
The majority of the Supreme Court of Canada agreed with the Court of Appeal's findings and upheld the decision that Mr. Evans had failed to mitigate his damages2. The Supreme Court of Canada confirmed that an employee may have a duty to mitigate with the same employer whether he or she is constructively dismissed, or alternatively, actually dismissed but then offered re-employment on a temporary basis.
Writing for the majority, Bastarache J. found that requiring an employee to mitigate by taking temporary work with the same employer is consistent with the notion that damages for wrongful dismissal are meant to compensate for lack of notice and not to penalize the employer. Moreover, there appeared to be very little practical difference between informing an employee that his employment will end in 12 months time, and terminating the employment but immediately offering a new employment opportunity for a period of up to 12 months. Accordingly, Bastarache J. noted that it is appropriate to assume that in the absence of objective factors making it unreasonable for an employee to return to work, he or she should be expected to return to work for the dismissing employer in order to mitigate damages.
When assessing a mitigation offer with the same employer, Justice Bastarache found that the central issue is whether a reasonable person would accept such an opportunity. This must be viewed objectively. Bastarache J. confirmed that the factors endorsed by the Ontario Court of Appeal in Mifsud3 should be considered; where salary offered is the same, where working conditions are not substantially different or the work demeaning, and where personal relationships are not acrimonious, the employee should accept the position offered in mitigation of damages. In addition, other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and whether the re-employment offer was made while the employee was still working for the employer.4 The critical element is that an employee "not be obliged to work in an atmosphere of hostility of embarrassment, or humiliation."5 In effect, a multi-factored and contextual approach to determining this issue was appropriate, and while an objective standard is applicable, non-tangible subjective elements must be included in the evaluation.
Though Evans argued that he would have been unable to perform his duties and felt ostracized in the workplace, there was no objective evidence of this. The evidence was clear that the relationship between Evans and the Union was not seriously damaged, and that the terms of his employment would have been the same. Evans had unreasonably refused the Union's offer of re-employment.
Practical Implications
The Supreme Court of Canada's decision in Evans has far-reaching implications. First, one could argue that dismissed employees will now be subject to a relatively more rigorous application of the duty to mitigate. The Court in Evans observed that if an employee is constructively or actually dismissed for reasons unrelated to performance, it is more likely that they would be obliged to return to work if asked than would employees terminated for other reasons.
As such, where employees have refused to remain in an altered position in order to mitigate, particularly in constructive dismissal cases, courts ought to be far less reluctant to reduce damage awards. Significantly, employers may now have the ability to return dismissed employees on a salary continuance to active employment (provided they have not become re-employed elsewhere), in satisfaction of the duty to mitigate. Ideally, this possibility should be mentioned in the termination letter.
Finally, and not to be overlooked, is the Supreme Court of Canada's confirmation that "Wallace damages" for bad faith dismissal are not subject to mitigation. The Court reasoned that these damages, though expressed in terms of an extension of the notice period, are in fact awarded as a result of the manner in which the employee is dismissed, and not for the purpose of assisting the employee in finding alternate employment. As a result, the employee's ability to replace this lost income through mitigation is not relevant. Until now, this has been a matter of some debate.
Footnotes
1. [2008] S.C.J. No. 20
2. Note that Madam Justice Abella, in dissent, concluded that where an employee is wrongfully dismissed (i.e. dismissed without cause and without notice), the employee is immediately entitled to an action in damages, and should not be required to mitigate by remaining in the workplace from where he or she has been dismissed. She reasoned that to impose such a requirement "disregards the uniqueness of an employment contract as one of personal service."
3. Mifsud v. MacMillan Bathurst Inc. (1989), 70 O.R. (2d) 701 (Ont.C.A.)
4. These factors were identified by the B.C.C.A. in Cox v Robertson (1999), 69 B.C.L.R. (3d) 65.
5. Citing Farquhar v. Butler Bros Supplies Ltd. (1988) 23 B.C.L.R. (2d) 89 (C.A.), at p. 94.
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