Across Canada, terminated employees typically have an obligation to mitigate any constructive or wrongful dismissal damages by seeking comparable employment. Comparable employment does not mean identical employment, but a comparable position in:

  • status;
  • hours; and
  • remuneration.

Where an employee has failed to mitigate their damages, the liability an employer owes for notice of termination may be reduced. Importantly, the burden of proof is on employers to prove the employee failed to mitigate by taking reasonable steps or accepting a reasonable offer from the existing employer or a new employer. Some Courts have said that employers wishing to argue an employee has failed to mitigate should be contributing to the employee's re-employment efforts by providing job counseling, job leads, or a reference letter. As such, it can be very difficult to prove an employee has failed in their obligation.

Recent decisions from Ontario and Quebec provide insight on when Courts will find that employees have failed to mitigate their damages.

Gannon v. Kinsdale Carriers

In a recent Ontario decision,1 an employee was terminated without cause after 22 years of service due to the closure of the business. At the time of her termination, the employee's duties included accounts receivable, dispatch and office clerk work.

After informing the employee about the impending closure of the business, the employer provided her with contact information for a company in the same industry to inquire about job opportunities. The employee interviewed with the company and the Court found that the employee was offered a full-time role as a dispatcher, with ancillary office administration duties. The employee did not accept the position, choosing instead to "see what's out there" and pursue online courses.

The employee argued that no formal offer was ever made and, if it was, the offer was not comparable employment. The Court disagreed with the employee and found that reasonable comparable employment was offered, and that it should not fall on the employer to fund the employee's "educational pursuits".

The failure to mitigate was proven and the employee was not entitled to damages for reasonable notice.

Poulin v. Hydro-Québec

Though such circumstances are rare, an employee's duty to mitigate may require re-employment with their former employer in a different position. This situation was recently analyzed in a decision from the Superior Court of Quebec, where a senior executive with 35 years of service was constructively dismissed due to a restructuring of executive responsibilities within the business.2

The employee was informed that he would be reassigned from a Vice-President role with primarily strategic duties to a Senior Director role tasked with implementing and executing strategy. The Court found that the newly offered position did not have the same level of prestige as his previous position and the employee had been effectively demoted.

Despite the finding that the employee had been constructively dismissed, the Court dismissed the claim and awarded no damages for notice on the basis that the employee should have accepted the new role and thus failed to mitigate his damages.

In concluding that a reasonable person would have accepted the new role, the Court found that:

  • the employee was very well liked by the employer and its employees;
  • the employee was fully qualified for the Senior Director position;
  • the working relationship was not acrimonious and he would not have been placed in a position of hostility, embarrassment or humiliation;
  • the work would not have been degrading;
  • the employee's remuneration would remain the same; and
  • the alternative offer was made to the employee while he was still employed and before he had commenced legal action.

The Court also highlighted a ruling from the Supreme Court of Canada which held that an employee's obligation to accept an alternative position is heightened if the termination of the employee's home position is not related to the employee but rather the legitimate needs of the business.3

This decision has been appealed and we will be following its progress.

Takeaways

In the current employment environment wrongful dismissal claims are increasingly common, notice periods being awarded are growing, and termination provisions in employment agreements are under more scrutiny. Establishing an employee's failure to mitigate damages is one of the few avenues available to employers to lessen their liability.

Footnotes

1. Gannon v. Kinsdale Carriers, 2024 ONSC 1060

2. Poulin v. Hydro-Québec, 2024 QCCS 280

3. Evans v. Teamsters Local Union No. 31, 2008 SCC 20

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.