The Ontario Court of Appeal has recently addressed the issue of an offer of employment made from the purchaser of the employer, and how such an offer factors into the mitigation of damages in a claim for wrongful dismissal.

On the facts of this case, the Court agreed with the position taken by the employee that he was not required to accept the newly offered position in view of the reduced status, hours of work and compensation. The issue became one of whether the employee should have accepted the alternate position to mitigate the damage claim.

The trial judge had determined that this was not required. The Court of Appeal agreed.

Overview

The particular context should be examined to understand why this case was decided as it was and how to avoid such pitfalls in the future, from the employer’s perspective and similarly from the employee’s view.

These types of actions can be high stakes poker for the employee as an adverse finding means considerable costs to be paid to the employer’s counsel and their own counsel. Add to this the fact that the employee has elected to walk away from paid employment, even if at a lesser rate, there is a premium placed on winning.

The Facts

The employees had each been employed with Imperial Oil for more than thirty years in executive positions in the retail side of the business when the company was sold to a competitor. They were told that they would be offered employment with the new company, and if they refused, their entitlement to severance benefits would be limited to the minimums set under the Employment Standards Act.

The new offers only protected their existing salaries for a period of 18 months, after which they would be reduced in line with current salaries for similar positions with the new employer. This would have resulted in significant decreases for both employees. Further, the new employer would not recognize their term of service, which would drastically reduce their entitlement to severance pay in the event of termination.

The Court of Appeal’s Findings

The Court of Appeal stated that the obligation on the employee is to accept “comparable employment”, not simply any employment. This is defined as follows:

 “Comparable employment” does not mean “any employment” but comprehends employment comparable to the dismissed employee’s employment with his or her former employer in status, hours and remuneration.

It must be recalled that it is the employer’s burden of proof to show a failure to mitigate.

Here are some of the material facts which influenced the Court in this case:

1. There was an immediate dramatic decrease in benefits;
2. There was to be a considerable drop in income, yet this reduction would not take effect until 18 months after the beginning of the new employment;
3. The company was prepared to provide monetary compensation for the loss in benefits, yet oddly enough, would not define this sum until the offer of employment had been accepted and a release had been signed; and
4. The new offer carried with it a waiver of recognition of prior years of service for both common law and statutory termination entitlements.

The Court of Appeal also noted that the trial judge’s finding on the evidence was entitled to deference. The lower court’s decision in favour of the employees accordingly was allowed to stand.

These facts were somewhat one-sided and the result predictable. Generally speaking, it is possible that the former employer would have succeeded in its position had the offer from the new employer simply stated that:

1. The salary was set at the same level for 18 months;
2. There would be recognition of prior history for statutory entitlements but not for common law claims; and
3. The responsibilities were the same or with minor variations.

Employees’ Take Away

The employees were successful in the case at hand, but prudent counsel will consider the risk of loss and weigh this against the propriety of remaining employed with a secure income. Claims of this nature have a fixed expected recovery based on notice. Would it be better to remain employed on lesser terms and resign when new employment is found? The answers are not always based on winning a lawsuit but rather real-world concerns.

Get Advice Before You Act

If you have questions about this issue or any employment issue, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise employees and employers on issues in the workplace. Contact us online or by phone at 416 364 9599 to schedule a consultation.