Friday, August 31, 2012

Ontario Employment Law: Mitigating Damages By Staying With The Same Employer

In Ghanny v. 498326 Ontario Limited, the Ontario Superior Court of Justice was faced with a question that has become all too common in these difficult market conditions.

Must an employee whose job is being eliminated by its employer accept the same kind of position at a related company with the same pay in mitigation of his losses arising from a wrongful termination?

In the case, the Plaintiff, an 18 year employee was terminated with less than one month's notice. By any measure, this was highly inadequate and wrongful. The Plaintiff's job as Service Manager at Downtown Toyota had been eliminated by the company. But as it happened, his employer offered him immediate re-employment at the same job at the same salary at Downtown Suzuki, a recently obtained and related dealership, just a few blocks away.  The Defendant made the same offer again months later, after receiving a letter from the Plaintiff's lawyer stating that the Plaintiff had been wrongfully dismissed and was seeking compensation for same.

The Plaintiff turned down both offers of re-employment for two reasons:
  1. He thought that his 18 years of service at Downtown Toyota would not be recognized if he joined Downtown Suzuki; and
  2. He was concerned that the future of this dealership in spite of having received assurances to the contrary from his employer.  
The Plaintiff argued that he was under no obligation to accept the offer of employment; the Defendant argued the contrary. In the end, the Plaintiff obtained a job in mitigation of his losses. However, it had taken him several months to secure and his salary at the new job was considerably lower than at his old job.

The Court, in deciding that the Plaintiff should have accepted the offer that had been advanced by his employer, considered the leading Supreme Court case on the subject Evans v. Teamsers Local 31, [2008] 1 S.C.R. 661, wherein it is stated:
[I]n some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer ... requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.

The Court held that a reasonable person, in the position of the Plaintiff, would have accepted the offer that had been advanced. The salary offered was the same; there were no changes in working conditions; and the personal relationships involved had not become acrimonious.

In so holding the Court had regard for the following statement of law from Evans:
The critical element is that an employee not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation … and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee's position would have accepted the employer's offer … it is extremely important that the non-tangible elements of the situation -- including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements -- be included in the evaluation.
The Court found that the Plaintiff, despite his statements to the contrary, had received assurances of job security from the Defendant  that his belief, that his 18 years of service would not be recognized, was not reasonable in all the circumstances. In any event, not enough reason him to refuse the position like he did.

This decision illustrates that  in certain circumstances, a wrongfully terminated employee may have to accept an offer of re-employment from its terminating employer.
- Robert Tanha, Toronto

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