Constructive dismissal and mitigation have been getting attention over the last month or so.  Some of these cases have their origin in the economic ‘crisis’ of 2008 that resulted in downsizing or restructuring.  In the most recent of these decisions, Bannon v. Schaeffler Canada Inc., the Ontario Superior Court of Justice has the latest word on when it’s reasonable to refuse an alternative offer.  This decision turned on whether it was reasonable for a 56 year-old employee with 36 years’ service and some physical limitations to refuse an offer of a new job with a loss of $3.39 an hour and involving different  terms and conditions of employment.

What happened?

Here’s what the court said:

The auto industry fell victim to the economic calamity of 2008 and the defendant experienced a preciptious decline in its business.  This resulted in the elimination of certain jobs within the company and extensive layoffs. … the plaintiff was advised that his job had been eliminated but he was entitled to exercise his seniority rights and  take a setter position pursuant to the defendant’s Lay Off and Recall Policy.

However, this new ‘setter’ position would result in an hourly rate reduction for the 36 year employee from $28.54 to $25.15 and the plaintiff did not believe that he had the technical knowledge or physical ability to do the job being offered.  He was 56 years old, had back problems when he was on his feet for a long time and didn’t feel he had the strength or agility required for the job.  Because of this, his response was less than enthusiastic.  The next day, he reiterated his concern that he would not be able to meet the demands of the job and by the end of the day, was called to a meeting where he was given a letter saying his employment in his present position was terminated effective that day.  The letter set out severance terms that included a lump sum payment of eight and one-half months at his current hourly rate. 

What happened next?

The plaintiff was not happy with the payment and sued the defendant saying he was entitled to 18 to 24 months notice of termination.  Although the defendant didn’t take serious issue with the suggested notice, it argued that the plaintiff failed to mitigate his damages by not accepting the offer of alternative employment it had made to him.  The plaintiff made two counter points:

  1. The duty to mitigate only arose after his termination and since he was not offered a job after he was presented with the termination letter, the defendant could not argue that his refusal to accept alternate work was failure to mitigate; and,
  2. The evidence supported his position that his refusal to take the setter job was reasonable in the circumstances.

What did the court say?

  1. No
  2. Yes

Why?

In the circumstances, the plaintiff had three choices:  accept the new job, accept the new job but sue for damages resulting from the reduction in his hourly rate, or reject the new offer and sue for damages for wrongful dismissal.  Because the plaintiff chose the latter, the issue of mitigation arose.

What would a reasonable person in the plaintiff’s circumstances have done?  Quoting from Evans v. Teamsters, [2008] 1 S.C.R. 661 a reasonable person should be expected to accept re-employment “where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships are not acrimonius”.  The court said there was no acrimony in this case and acceptance of the alternative employment would not have required him to work in an atmosphere of hostility, embarrassment or humiliation, but said acceptance of the alternative employment was unreasonable:

…It is my opinion, that given his age, physical limitations, the different nature of the work, the changes in working conditions and the many years that had passed since he had done such work, …the plaintiff’s decision not to accept the new job was reasonable.

The court assessed reasonable notice at 20 months, less the eight and one-half months previously paid.