One of the basic precepts of employment law is that an employee who has been terminated, or elects to treat their employment as having been terminated, has a duty to attempt to mitigate their damages. In other words, a dismissed employee must use reasonable efforts to avoid economic loss by seeking out comparable employment. In many circumstances, this can in turn give rise to the question of whether an offer from the existing employer, perhaps involving changes in terms and conditions of employment, must be accepted as a means of mitigating what a dismissed employee would otherwise claim are his or her economic damages from the dismissal.
In 2008, the Supreme Court of Canada reached a decision (Evans v. Teamsters Local Union No. 31) which caused this area of the law to become more uncertain. In that case, the court held that a terminated employee failed to mitigate his loss after refusing his employer’s offer of re-employment, five months after he was dismissed. This decision lead both dismissed employees and legal practitioners to wonder how far the obligation to accept continued employment from an existing employer, even if terms and conditions of employment change, extends.
Recently, the British Columbia Court of Appeal was called upon to grapple with that issue in Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd. In the context of a constructive dismissal, the appellate court distinguished Evans, and found that it was not unreasonable for Mr. Sifton to refuse his former employer’s offer of re-employment, given the fundamental nature of the changes to the terms of his employment but, more importantly, due to the acrimonious workplace environment existing at the time of termination.
At trial, the judge found that the reduction in Mr. Sifton’s income, from $78,000 to $60,000, following financial hardship experienced by the dealership, was significant, and that his move back to a technician level position, with the associated loss of his shop foreman/manager position, constituted fundamental changes to his employment contract, amounting to a constructive dismissal. The trial judge further concluded that Sifton’s period of reasonable notice was 14 months, and based his award of damages in lieu of notice accordingly. He used Mr. Sifton’s regular pre-reduction income for determining damages.
The dealership, at trial, had taken the position that Sifton resigned his employment.
Following the trial, the dealership appealed to the British Columbia Court of Appeal. Its primary argument was that the trial judge erred in concluding that Mr. Sifton had not failed to mitigate his damages by refusing its offer of re-employment, and that the trial judge misapprehended and overlooked evidence relevant to mitigation.
After reviewing the applicable case law, the British Columbia Court of Appeal concluded:
…Mr. Sifton was offered a job that was dramatically different than the job he had been doing for 11 years at a significantly lower rate of pay. Further, the relationship between Mr. Sifton and Mr. Gordon was not “cordial”. Mr. Braun described the meeting between the two as “tense”. While I do not accept Mr. Gordon was in “a tirade”, it is clear that he was an assertive and, at times, insensitive individual. There is no question that Mr. Sifton was unhappy about the change to his position and had difficulty hiding it; since Mr. Gordon would not “tolerate negativity” it is unclear how he and Mr. Sifton could have functioned harmoniously in the workplace.
In rejecting the dealership’s appeal, the court emphasized that these types of cases must be decided on an individual, case by case basis, and a particular factor, which may be important or even overriding in one case, will not necessarily be as important in another.
In reaching its conclusion, the Court of Appeal in British Columbia distinguished the Evans decision. It did so having in mind that the workplace environment for Mr. Sifton had deteriorated, and the effect of returning him to the work force would be incongruent with a civil and decent working relationship. Leaving an employer and asserting constructive dismissal can still amount to a high risk situation for a departing employee. Not only will the employer typically assert that, from their point of view, the employee has quit, but may go further and assert that the employee has failed to mitigate his or her economic loss, as claimed, by not either staying in the job or accepting an offer of re-employment.