Does an Employee’s Duty to Mitigate Extend to Offers of Re-employment Following Dismissal?

By Andres Barker, Lawyer.

mitigate reemploymentIt is a basic, fundamental principle of Canadian wrongful dismissal law that an employee has a duty to mitigate her losses following the termination of her employment. The essence of this duty is that a dismissed employee must look for comparable work matching her skills, qualifications and professional status. If an employee fails to mitigate following a wrongful or constructive dismissal, this may lead to a reduced damages award in court should she later sue her former employer for wrongful dismissal.

In certain cases, an employee may be required to mitigate by continuing to work for an employer that has constructively dismissed him, i.e., made a unilateral and substantial change to his employment terms that amounts to a fundamental breach of his contract. (For more on constructive dismissal, see our separate post on employee condonation here.) In rarer situations, an employee may have to consider mitigating by accepting an offer of reemployment from the same employer who previously dismissed him. While somewhat unusual, this most often occurs when an employer mistakenly provides the employee with less severance than he is entitled to by law, or unknowingly constructively dismissed the employee when it attempted to temporarily lay him off, and later attempts to corrects its error by trying to bring the employee back to work.

The question is: Does an employee’s duty to mitigate require him to take his old job back in such cases?

The Case of Fredrickson v. Newtech

The BC Court of Appeal recently considered an employee’s duty to accept offers of reemployment in Fredrickson v. Newtech Dental Laboratory Inc. In that case, the employer advised the employee that she was laid off due to insufficient work and provided her with a record of employment and a letter of reference.

The employee subsequently retained counsel, who sent a demand letter to the employer several months later. In response, the employer’s counsel advised the employee that she was expected to resume work effective almost immediately.

Rather than return, the employee sued her former employer for wrongful dismissal. After she commenced the lawsuit, the employer offered to both reemploy her at her same position, salary, and benefits, and to pay her lost wages to the date of its initial offer of reemployment. The employee declined these offers, asserting that the employer’s decision to lay her off had broken the employment relationship and that it was not reasonable to expect her to come back to work.

Trial Judgment

The trial judge concluded that the employer had dismissed the employee, but that there were no barriers to her accepting the reemployment offers, and that she therefore failed to mitigate her damages. She received damages only from the date of her dismissal until the date the employer offered to return her to work several months later.
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On Appeal

The employee appealed this decision to the Court of Appeal, arguing that the trial judge erred by not considering the employer’s alleged bad faith behavior when he determined that it was not reasonable for the employee to reject the reemployment offers. The bad faith conduct of the employer involved surreptitious recordings of conversations with the employee, and discussions with another employee about the employee’s employment.

The appeal court concluded that the trial judge had erred in two respects. First, the initial offer to rehire the employee was not a “make whole” offer, as it did not offer to put her in the position she would have been in had she not been wrongfully dismissed. And second, when the employer did eventually offer the employee back pay, it was only up to the date of the first offer of reemployment and not up to the date of the most current offer. As a result, accepting reemployment would have put her in the position of working for the employer while having a legal claim against it that put the parties in opposition.

The appeal court also considered the context of the working environment, which was a small one and therefore raised impracticalities in terms of having the parties work together harmoniously while litigation was ongoing. They also gave weight to the erosion of trust created by the employer’s surreptitious recordings and discussion of the employee’s employment matters with an existing worker.

The court concluded by reversing the trial judge’s decision on the mitigation issue, and sending the case back to the trial judge for a decision on the matter of the employee’s appropriate period of notice.

Implications for Employers

The key takeaway from the Fredrickson decision for employers is:

  • If you make a strategic decision to offer re-employment to remedy a mistaken or flawed dismissal, be certain that the offer will make the employee whole for her losses. Otherwise, you will be more vulnerable to a successful wrongful dismissal claim by the employee.

Have questions about a dismissal? Contact us!

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