ENGINEERS & THE LAW – Defence Against Wrongful Dismissals

Several recent decisions have seen employees penalized for failing to accept reasonable offers of new or alternative employment after they are dismissed.

The duty of employees to mitigate damages that arise out of the termination of their employment has always existed. What this means is that if an employee makes a claim for wrongful dismissal and argues that they are entitled to more notice of dismissal or pay in lieu thereof, they must be able to show that they made reasonable efforts to find new work. If a court finds that the individual has not made these reasonable efforts, then the amount of damages to which they may be entitled can be reduced.

It has long been recognized, however, that in the vast majority of cases the duty was virtually meaningless because the courts would require little more than a token effort on the part of an employee to satisfy their obligation. Typically, it would only be in the rarest of cases — where the employee could not show they had made any effort to find new work, and the employer was able to show that such work was available — a court might penalize the employee by reducing the amount of pay in lieu of notice that he or she was awarded. 

However, several recent cases suggest Canadian courts are taking a harder look and reducing awards to employees if their efforts to find new work are found to be lacking.

In Ghanny v. 498326 Ontario Limited, the plaintiff was a service manager with 18 years of service at a Toyota dealership. His position was eliminated and he was offered a total of four months’ notice and pay in lieu thereof.  However, he was also offered a similar position at a Suzuki dealership owned by the same company. The plaintiff refused this offer, and commenced his wrongful dismissal action. Although the Superior Court of Justice of Ontario found the appropriate notice period would have been 14 months, it declined to award any damages to the employee as it found that he had completely failed to mitigate his damages by not accepting the offer made to him at the time of dismissal.

In a somewhat unusual case, the plaintiff in Chevalier v. Active Tire & Auto Centre Inc. was initially laid off, but after he alleged constructive dismissal, his employer was advised by its counsel it did not have the right to lay him off. As a result, the company took the unusual step of apologizing and inviting him to return to work in his previously held position. However, the employee refused and continued with his court action. Ultimately, a judge of the Superior Court of Justice in Ontario concluded he should have returned to work and he had entirely failed to mitigate his damages when he refused to do so. As a result, no damages were awarded.

Finally, a recent decision of the Superior Court of Quebec (Levy v. Standard Desk Inc.) involved a 75-year-old employee. When the plant was shut down, he was offered a position with a related entity in a different municipality. A shuttle service was even offered to make up for the extra travel. However, the plaintiff refused and sued. The court found that although the plaintiff would have been entitled to 14 months’ notice, he was obligated to seek new employment in the same manner a younger person would be, and his failure to do so resulted in denial of damages.

What this means for employers

Perhaps the recent trend is a result of the economic times and the fact that people should be encouraged more strongly to accept reasonable offers of employment rather than pursue litigation or collect employment insurance. Regardless of the rationale, how can employers take advantage of this trend? 

First, after you dismiss an employee you should proactively seek out evidence that there is employment available to them. Review online and more traditional sources, and speak with your contacts within the industry in order to identify any jobs that the employee in question could potentially apply for.

When I am representing an employer that is faced or threatened with a wrongful dismissal claim, I ask them to provide this information on available positions to me, and I routinely forward the job postings to counsel for the plaintiff and “suggest” that their client might want to apply. If they don’t, it can be used against them in the course of litigation.

Even if the employee has not retained counsel, it is open to the former employer to forward potential jobs and opportunities to the former employee, both in order to assist them and also to lay the groundwork for the company’s own potential legal defence.

In addition, if an organization is going to enter into a termination agreement, I often recommend  that they avoid lump sum payments (unless they can agree upon a substantially discounted amount) in favour of salary and benefit continuance, with a clawback in the event the employee gains new employment. The company should then assist the employee in seeking new work by providing a positive letter of reference (as appropriate), monitoring available jobs, and even considering the provision of outplacement counsel. While this does involve some cost, if the employee is successful in obtaining a position sooner, then your company’s dismissal costs will be significantly reduced.

Finally, if there is a potential claim, or if an employee is currently receiving salary and benefit continuance, it is always wise to keep track of whether she has new employment. Among other things, you can monitor her LinkedIn profile.

It is often surprising how individuals that “forget” to report new employment to their former employer are quick to post the details online. If you discover they have mitigated their damages, and the termination agreement allows you to do so, you can then cut off or reduce the severance payments. Alternatively, if there is ongoing or subsequent litigation, you can rely upon the information that you have obtained in order to improve your negotiation and litigation position.cce

Stuart Rudner is a partner in the Labour & Employment Law Group of Miller Thomson LLP in Toronto. E-mail srudner@millerthomson.com, or  join his Canadian Employment Law Group on LinkedIn.