Ontario: Return to Work Not Always Required to Mitigate Losses

By Amanda Boyce May 11, 2017
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In some circumstances, an employee in Ontario will be obligated to accept continued employment with the company that terminated him or her to reduce any monetary award to the employee for breach of contract. If the employee fails to mitigate his or her losses in this manner, the notice period for the dismissed employee—the basis of determining damages owed to the employee—may be reduced. A recent Ontario Court of Appeal decision reminds, however, that an employer's offer must meet certain conditions or else the employee may refuse to accept it.

The employee in this case was 51 years old and had worked for the employer for 19 years as director of purchasing. He received a salary of about $82,000. The employer decided to restructure and terminated the employee without cause.

The employer offered him a severance package consisting of his statutory minimum entitlements in exchange for a full and final release. It also offered him a new full-time position as supervisor of service at a salary of more than 20 percent less than his previous salary. That new employment offer also included a six-month salary guarantee at his old salary to help him transition. The employee declined both offers.

At trial, the employer argued that by failing to accept the new employment offer, the employee had failed to meet his duty to mitigate. The motion judge, in dismissing this defense, found that the new employment offer was at a significantly lower salary than the employee's former salary. The court also found that the employer had not told the employee that the new employment offer was also an offer to work during the notice period, and so he didn't have to waive his right to claim wrongful dismissal by accepting the offer. In effect, the employer sought to obtain a release through the "back door."

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In upholding the motion judge's decision, the Court of Appeal reiterated that when an employer offers an employee the chance to mitigate damages by returning to work in some capacity, the central issue will be whether a reasonable person would accept such an opportunity. In this case, the court held, a reasonable person would not have given up his ability to pursue his rights.

Fillmore v. Hercules SLR Inc., 2017 ONCA 280 (April 4, 2017).

Professional Pointer: During restructuring, employers may attempt to limit their liability by providing employees with an opportunity to perform alternative work during the notice period. However, as this case illustrates, when the offer is not on substantially similar terms (particularly financially), employees may not be obligated to accept it. In this case, after the employee rejected the new position, the employer should have offered him the opportunity to work out his notice period in his previous position, expressly without prejudice to his ability to pursue his claim for wrongful dismissal.

Amanda Boyce is an attorney with Stringer LLP, the Worklaw® Network member firm in Toronto.

 
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