In a recent Ontario Superior Court (“Court”) case Justice Favreau ruled in favour of the Plaintiffs in finding that they were entitled to 26 months' notice and did not act unreasonably in failing to accept employment from the purchaser of the Defendant’s business. Through the ruling in Dussault v. Imperial Oil Limited, 2018 ONSC 1168 the Court provides further clarity with respect to the duty to mitigate by accepting new employment in the context of a sale of business and reminds us that there is no longer a 24-month “cap” when it comes to reasonable notice awards.
The case involved two Plaintiffs who held management-level positions with Imperial: Mr. Dussault, who was 63 years old at the time of the termination of his employment, had over 39 years of service with Imperial while Ms. Pugliese, who was 57 years old at termination, had 36 years of service.
Mac’s Convenience Stores took ownership of Imperial’s Ontario retail locations in 2016 and as part of the asset sale both Plaintiffs were provided with offers of employment with Mac’s.
The offers made were not favourable to the Plaintiffs as they:
- Did not guaranteed a permanent, comparable salary;
- Reduced the Plaintiff’s existing benefits including their vacation entitlement; and
- While Mac’s offered to compensate the Plaintiffs for reduced benefits by way of a "lump sum gratuitous payment", it did not disclose the amount of the payment.
- Failed to recognize the Plaintiff’s years of services with Imperial for the purpose of their entitlement to reasonable notice or pay in lieu of reasonable notice upon termination.
The Plaintiffs rejected the offer from Mac’s and brought a wrongful dismissal lawsuit against Imperial claiming entitlement to 32 months' notice at common law.
Imperial defended the claim by arguing that there were no exceptional circumstances warranting a notice period exceeding 24 months and that the Plaintiffs had failed to meet their duty to mitigate by rejecting offers of employment from Mac's.
No Duty to Mitigate
Justice Favreau ruled in favor the of Plaintiffs finding that they did not have a duty to mitigate their damages by accepting Mac’s offers of employment. In making its decision the Court relied on the fact that the Mac’s offers did not provide terms of employment comparable to those previously provided by Imperial; the offers were made prior to the termination of the Plaintiff’s employment; the offers required the Plaintiff’s to sign a release in exchange for an undisclosed “gratuitous lump sum”; and the offers did not recognize the Plaintiff’s years of service with Imperial.
The Court also found that each Plaintiff was entitled to 26 months' notice, thereby reaffirming that there is no 24-month "cap" on damages in lieu of reasonable notice of termination.
In coming to its conclusion, the Court rejected Imperial’s argument that because the Plaintiff’s were provided with advanced notice of the sale of the business, they should be entitled to a shorter notice period. The Court reminded the Defendants that notice of termination must be clear and unambiguous and reasoned that since the Plaintiffs had only been notified that a sale of the business was being negotiated, this did not constitute clear notice of termination. Further, the Court pointed out that since the Plaintiffs had been told that comparable employment would be offered by Mac’s, they were not put on notice to search for comparable alternative employment.
The following can be garnered from the Court’s decision in Dussault v. Imperial Oil Limited:
- The Court reminded us that there is no longer a 24-month cap on reasonable notice, and therefore, although awards in excess of 24 months are rare, employers should be sure to have strong written employment contracts in place for all employees to limit any liability post termination;
- In a sale of a business, sellers should be aware that employees may not be expected to mitigate their damages by accepting employment on terms that are either not made clear or are not comparable to their current terms of employment and therefore, to limit their liability, sellers should insist that the proposed terms and conditions of employment with the buyer be substantially similar to those enjoyed previously by the employees.