Mitigation is a basic principle of contract law. In the context of an employment relationship, a dismissed employee has to take all reasonable steps to minimize any losses that she has suffered as a result of her termination of employment. Generally, this means that an employee who has been dismissed must take reasonable measures to find another job, instead of simply sitting back and allowing the losses to accumulate.
In the case of Michaels v. Red Deer College, Chief Justice Laskin explained the “duty to mitigate” as follows:
…The primary rule in breach of contract cases, that a wronged plaintiff is entitled to be put in as good a position as he would have been in if there had been proper performance by the defendant, is subject to the qualification that the defendant cannot be called upon to pay for avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a “duty” to mitigate should be understood in this sense.
In short, a wronged plaintiff is entitled to recover damages for the losses he has suffered but the extent of those losses may depend on whether he has taken reasonable steps to avoid their unreasonable accumulation. …
But what about when the employer that terminated you asks you to come back and accept a different position? The BC Court of Appeal dealt with this issue in the decision of Davies v. Fraser Collections Services Ltd. In this case, Mr. Davies succeeded in proving that he was constructively dismissed but failed to show that he acted reasonably by choosing not to return to the workplace that fired him.
Mr. Davies employer had experienced a slowdown in work, and Davies, a 63-year-old Debt Collector was told that he would be placed on a temporary layoff. During Mr. Davies’ exit meeting he was also advised that his employer hoped to recall him back to work, on a long-term basis, as soon as the company regained financial stability. Mr. Davies was invited to remain in touch with the company during the layoff period, in order to discuss his potential to return to work.
Being placed on a temporary layoff did not sit well with Mr. Davies. He felt “financially stranded” and “dumped”. Nevertheless, approximately two months later, Mr. Davies was called back to work. He declined the offer and sued the company for severance instead.
Mr. Davies sued for damages, alleging that his layoff amounted to a dismissal. Relying on the legal doctrine of constructive dismissal, Mr. Davies was able to successfully argue that because his employment contract did not expressly or implicitly allow for temporary layoffs, he was in fact terminated and entitled to damages. However, now that Mr. Davies had obtained the right to damages stemming from his dismissal, he had also inherited the duty to mitigate those damages. The employer was able to prove that a comparable job was open for Mr. Davies to accept, but that Mr. Davies had refused his employers’ offer. Although Mr. Davies had made out his claim for wrongful dismissal, the court ultimately reduced his damages by 80% for refusing to return to work by awarding him only the 2 months that no work was available, before the company asked him to return.
An employee may be found to have failed to mitigate their damages if the employee is offered a job back with the employer to serve out the notice period, if, on an objective evaluation the following can be established:
- The salary offered is the same;
- The working conditions are not substantially different or the work demeaning;
- The personal relationships involved are not acrimonious; and
- The critical element is that an employee would not be working in an atmosphere of hostility, embarrassment or humiliation.
Other considerations include:
- The history and nature of the employment;
- Whether or not the employee has commenced litigation; and,
- Whether the offer of re-employment was made while the employee was still working for the employer or only after the employee had already left.
In a situation where the employee has already commenced a legal action when they are recalled by their previous employer, the court has noted that although it should be taken into account, it does not by itself relieve the employee from the duty to mitigate their damages. Rather, the entirety of the situation that must be evaluated in every case when determining whether the employee has made a reasonable effort to mitigate.
In the case of Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd., the court applied these criteria to reach a different conclusion. In this case, the employee was offered another position with their employer; however, it was at a reduced income and consisted of fundamentally different duties. The court concluded that there was no failure to mitigate when not accepting such a position.
In summary, what is clear is that the court will carefully consider the facts and circumstances in each situation, before determining whether an employee failed to meet the duty to mitigate. Whether you are an employee or an employer, it is always best to seek and receive legal advice prior to making decisions affecting employment.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.