Employee Constructively Dismissed, but No Damages Awarded Because of Failure to Mitigate

Co-authored with Christina Catenacci LLB

The Ontario Superior Court of Justice just decided that although an employee was constructively dismissed when he was suddenly “laid off,” the employer did not owe the employee any damages because he failed to mitigate his loss.

Facts of this case

The employee, Earl Chevalier, worked at an automobile service centre for 33 years, and was manager of one of the locations for 18 years.

In 2007, the employer was taken over by another company, Active Tire & Auto Centre Inc.

Chevalier signed a new employment agreement with Active Tire & Auto Centre Inc. that required him to fully comply with, and implement the new employer’s operating procedures set out in its manual. The agreement also stated that Active Tire & Auto Centre Inc. could unilaterally change the employee’s duties, responsibilities, reporting relationships and the location of his employment. An email added to the agreement stated that, should a change in an employee’s work location be required, the change would not require the employee to travel further than 50 kilometres from the employee’s home, or the current distance from home to work should it be greater than 50 kilometres.

From the time of the acquisition by Active Tire & Auto Centre Inc. and over the next year and a half, Chevalier worked in his original location, then three other locations he commuted to (some more than 50 kilometers away), and then back at his original location. Chevalier was of the view that some of the job duties he was given were demeaning.

Then, around the end of October 2008, Chevalier was told in writing that he was being laid off. Two weeks later, he commenced a wrongful dismissal action against his employer, Active Tire & Auto Centre Inc.

This is where it got interesting.

A few days after the action began, Active Tire & Auto Centre Inc. wrote the employee and asked him to return to work, saying that they had no right to lay him off and that it was a mistake to terminate him. The employer apologized for the mistake.

Chevalier said no, and his lawyer confirmed in writing that the employee would not be returning to work, and would be continuing his wrongful dismissal action.

Eventually, (17 months later) Chevalier found a job as a service manager with a competitor.

At court, the parties agreed there was a constructive dismissal. The question was about the damages.

Chevalier asked for 24 months’ notice of termination in lieu thereof ($64,105). He also asked for moral damages in the amount of $30,000, based on the employer’s conduct toward him leading to his dismissal, namely, that the employer was unfairly critical of his work, treated him in a demeaning fashion and ignored his contractual rights by requiring him to work in a location more the 50 kilometres from home.

Active Tire & Auto Centre Inc. argued that although the employee could have been entitled to notice of termination in the range of 18 to 24 months, the employee should not be entitled to any damages in lieu of notice because he failed to mitigate his damages in two ways:

• He failed to return to work when the employer called him back and apologized
• He failed to diligently look for suitable work with another employer in the period following his departure, around 17 months

Also, Active Tire & Auto Centre Inc. denied that there was anything in its conduct toward the employee that would justify an award of moral damages.

The court decided that, given all of the factors to consider—i.e., age, position, long history with his employer and economic conditions—the employee would have been entitled to a notice period of about 18–24 months. However, this award is in question because of the mitigation issue.

The legal principle being:

Where an employee has been wrongfully terminated, the employee must take reasonable steps to mitigate his or her damages as a matter of contract law. Any benefit derived from complying with this duty must be deducted from damages awarded in lieu of reasonable notice. The onus is on the employee to establish the amount of his or her loss on the balance of probabilities. However, if the employer takes the position that the employee could reasonably have avoided part of the loss claimed by obtaining other suitable employment available to the employee; the employer has the burden of proof on that issue.

The court found that Chevalier was not entitled to an award because he failed to mitigate his damages.

Chevalier argued that from mid-2007, Active Tire & Auto Centre Inc.’s management personnel had engaged in conduct intended to “make his life miserable” in order to cause him to leave his job. The alleged conduct included unfair criticism of his work, treating him in a demeaning fashion and ignoring his contractual rights by requiring him to work more the 50 kilometres from home. Had he returned to work, he would have been obliged to work in an atmosphere of hostility, embarrassment and humiliation.

The court disagreed. In fact, the Supreme Court of Canada decision in Evans v. Teamsters Local Union No. 31 states that, where an employer offers an employee a chance to mitigate damages by returning to work, the employee is required to return to work for the former employer.

The central issue is whether a reasonable person would have accepted such an opportunity. Using language from Evans, the critical element to determine reasonableness is that an employee “not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.”

After analysis, the court determined that, under the circumstances, a reasonable person would have returned to work, because accepting the opportunity to return to continued employment would not have obliged Chevalier to work in an atmosphere of hostility, embarrassment or humiliation for the following reasons:

• Though the employee felt he was subject to a “harassment campaign,” it was the goal of the employer to train managers on interactions with customers in order to improve sales; there was no harassment, just an attempt to improve the employee’s contribution to the company
• The employee appeared to be very bitter about his experience as an employee of the employer, and this magnified and distorted his view of events
• Though the employer had the employee work more than 50 kilometers away, the employer explained that the provision in the contract was added so employees knew that if there was a commute further than 50 kilometers, that commute would be made at the company’s expense
• Also, the court noted the employee signed an agreement stating that the employer could unilaterally change the location at any time
• The court concluded that the changes in locations were not part of a campaign to cause the employee to leave the company as the employee claimed
• The conduct of the employer when it terminated the employee was not humiliating or demeaning; the decision was made because of the financial performance of the employee’s original location
• Further, the employer apologized for its mistake in terminating the employee

That said, the court did not agree with the employer’s second argument relating to mitigation of damages. It concluded that, while it would have been preferable for Chevalier to have started his job search earlier than he did, he ultimately found a similar position. Therefore, the termination notice would not have been reduced for this reason.

In respect of moral damages, the court decided that Chevalier had already relied on the same arguments to support his position that he was not required to return to work. There was no breach of the employer’s obligation of good faith and fair dealing in the manner of dismissal. Though the employee asserted that he suffered some mental distress, there was not enough evidence to support this claim.

So, in the end, the employee was awarded nothing.

The employer may have made a mistake when it terminated the employee, and this constituted an admitted constructive dismissal. But, then it did the right thing afterwards; it apologized and asked the employee to return. Since there was no atmosphere of hostility, embarrassment or humiliation, a reasonable person would have returned.

If you were Chevalier, under the same circumstances, would you have returned after being wrongfully dismissed?