Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357

AREAS OF LAW: Employment law; Termination; Offer of re-employment; Mitigation of damages

~When considering whether an employee failed to mitigate her damages by refusing an offer of re-employment, the trier of fact must take into account such factors as the completeness of the offer and the erosion of trust between the employer and the employee.~

BACKGROUND: The Appellant, Ms. Fredrickson, worked for the Respondent, Newtech Dental Laboratory Inc. In July 2011 her employment as a registered dental technician was terminated after eight and a half years. In the time preceding her termination, the Appellant came under significant stress resulting from her husband’s illness and a serious accidental injury to her son. The Respondent was aware of these issues. On April 28, 2011, the Appellant took a medical leave of absence. She did not discuss the leave beforehand with Mr. Ferbey, the owner of the Respondent, but there had never been a problem in the past with her taking medical leave when necessary. While the Appellant was on leave, Mr. Ferbey disputed her entitlement to have taken it. In July 2011 the Appellant’s doctor advised her that she would be fit to return to work July 20, and provided a note to that effect. When the Appellant reported for work on July 20, 2011, Mr. Ferbey informed her that she was laid off because of insufficient work. The Respondent provided the Appellant with a record of employment indicating that she had been laid off, and Mr. Ferbey gave her a letter of reference. The Appellant engaged counsel and sent a demand letter to the Respondent. On September 23, 2011, the Respondent through its counsel directed the Appellant to resume work effective September 26, 2011. The Respondent’s counsel further indicated that if the Appellant was dismissed, she was obligated to mitigate her damages by accepting the offer of re-employment. On October 19, 2011, the Respondent offered to re-employ the Appellant with an offer to pay some of her unpaid wages. The Respondent did not know at this point that the Appellant had commenced an action for damages for wrongful dismissal on October 18. The Respondent made three subsequent offers of re-employment which the Appellant rejected, stating that Mr. Ferbey’s behaviour since the time of the purported layoff had broken the employment relationship. Throughout the trial the Respondent maintained the position that it had not dismissed the Appellant at the time of the layoff, but in closing submissions it acknowledged that she had been dismissed without cause and without reasonable notice. Thus, the only issue remaining at the end of the trial was whether the Appellant failed to mitigate her damages by refusing to accept the offers of re-employment. The trial judge concluded there were no barriers to the Appellant accepting the offers, and that to accept them would have been the reasonable thing to do in the circumstances. He found that she failed to mitigate her damages and only awarded her damages for the period from July 20 to September 23, 2011.

APPELLATE DECISION: The appeal was allowed. The Appellant submitted that the judge erred in failing to place any weight on the bad faith evidenced by certain of Mr. Ferbey’s actions, including his surreptitious recording of two conversations with her and his discussion of her employment with another employee. The Court of Appeal found that the trial judge erred with respect to the mitigation issue in two ways: first, by failing to accord significance to the incomplete nature of the offers, and second, by failing to reflect the intangible element of mutual trust in the employment relationship. The trial judge appeared to consider the September offer to be a “make whole” offer, but this offer did not deal with the Appellant’s lost income from July through to the date she was directed to return to work. It was not, therefore, a “make whole” offer. However, the Appellant was entitled to compensation for that period, because she had been wrongfully dismissed. The subsequent offers never completely met the Appellant’s loss of income. These offers were made at a time when the Respondent was maintaining that the Appellant had not been dismissed, so entitlement to compensation was still at issue. Efforts to recover the outstanding amount would need to broach this issue, continuing the conflict between the parties. The Court of Appeal also found that the trial judge was clearly wrong in failing to reflect the mutuality of trust, in the context of employment, inherent between employer and employee. The Court accepted that the Appellant’s trust in her employer was eroded by Mr. Ferbey’s actions, and found that she was not unreasonable in refusing to return to work. The order was set aside and the question of reasonable notice remitted for determination by the trial judge.

Case Comment by Timothy D. Goepel, Lindsay Kenney LLP , Counsel for the Appellant Leah Ann Fredrickson

“I think there are three important points from the decision of the Court of Appeal in Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357.

First, if an employer wants to raise as a defence a failure to mitigate for not accepting an offer of re-employment, it should ensure that the offer of re-employment made to the employee makes the employee whole for lost wages.

As provided for in the decision, an employee should not be required, in mitigating her damages, to return to a work environment where she will simultaneously be involved in litigation with her employer to recover amounts owed to her as a result of the employers own breach of contract.

Employers are not entitled to terminate employment relationships without giving notice or payment in lieu thereof. The court found that it would be unjust to require an employee, when faced with an offer of re-employment, to choose between: returning to work and suing its employer; returning to work and allowing its employer to skate free of its accrued obligations; and declining the offer and forego any claim to additional notice on account of a failure to mitigate.

Second, if an employer wants to raise as a defence a failure to mitigate for not accepting an offer of re-employment, the way that the employer treats its employee is important.

Acting in good faith, fair dealing and trust govern the employment relationship, and it is a two way street. The element of trust in the employment relationship is critically important, and doing things that would create distrust or harm the relationship (like in this case secretly recording conversations), may prevent an employer from arguing that an employee failed to mitigate by not accepting an offer of re-employment.

Third, the Supreme Court of Canada in Evans v. Teamsters Local Union No. 21, 2008 SCC 20, did not change the rule that that it is an infrequent case that requires the employee to accept re-employment in order to mitigate her damages ( as was held by Chief Justice McEachern in Cox v. Robertson, 1999 BCCA 640).”