Is an employee who has been terminated required to return to work for his employer in order to mitigate his damages? Until recently, it was believed that the circumstances in which an employee was required to return to work for an employer who has terminated him were very limited. However, the recent decision of the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31 indicates that these circumstances may be broader than previously thought.

Background

In December 2002, following a heated campaign, a new union executive was elected to office. Shortly thereafter, Don Evans received a letter from the union advising him that, with the change in executive, he was being terminated. The termination letter was silent on the issue of notice or severance in lieu thereof. At the time of his termination, Mr. Evans had worked as a business agent in the union’s Whitehorse office for approximately 23 years. Mr. Evans retained legal counsel, who advised the union that his client was prepared to accept 24 months’ notice of termination, which could be granted as a combination of 12 months’ continued employment and 12 months’ salary in lieu of notice. For several months thereafter, the negotiations between legal counsel continued as the union continued to pay Mr. Evans his salary and benefits even though he was no longer working.

When the settlement negotiations broke down approximately 5 months later, counsel for the union issued a letter demanding that Mr. Evans return to work or serve out the balance of a 24 month notice period. The letter further stated that, if he failed to return to work, Mr. Evans would be terminated for cause. Further communications from Mr. Evans’ lawyer also sought to resolve the status of Mrs. Evans, who also worked in the Whitehorse office, and to secure a withdrawal of the notice of termination, both of which were rejected by the union.

Mr. Evans was initially victorious in his wrongful dismissal lawsuit at trial; the Court awarded him damages for 22 months’ notice. However, on appeal to the Yukon Court of Appeal (which is composed of judges who also sit on the British Columbia Court of Appeal), the Court overturned the judgment, finding instead that Mr. Evans had failed to mitigate his damages by returning to work (hereinafter referred to as the “Mitigation Argument”) as the union had requested. Mr. Evans then appealed to the Supreme Court of Canada.

At the Supreme Court of Canada

Prior to the Court of Appeal’s decision, courts in Canada had generally dealt with the Mitigation Argument differently when dealing with cases of wrongful dismissal (where an employee is terminated without any or adequate notice of termination) versus cases of constructive dismissal (where an employee’s job description or conditions are unilaterally changed, but they are not actually fired.) For the most part, courts had accepted that, in cases of wrongful dismissal, the firing damaged the employment relationship, making it difficult for the employee to return to the workplace and, as a result, courts held the dismissed employee did not have to mitigate his claim (loss of earnings) by returning to work for that employer.

At both the Court of Appeal and in the majority’s decision at the Supreme Court of Canada (the Court split in its ruling 6-1), the Courts ruled that the distinction between situations of wrongful dismissal and constructive dismissal is an artificial one for the purposes of assessing the duty to mitigate and that applying the duty in both situations is “consistent with the notion that damages are meant to compensate for a lack of notice, and not to penalize the employer for the dismissal itself.” As a result they stated that: “there appears to be very little practical difference between informing an employee that his or her contract will be terminated in 12 months’ time (i.e. giving 12 months of working notice) and terminating the contract immediately but offering the employee a new employment opportunity for a period of up to 12 months. In both situations, it is expected that the employee will be aware that the employment relationship is finite, and that he or she will be seeking alternate employment during the 12-month period.”

So what will a court consider when determining whether an employee who has been terminated has a duty to mitigate by accepting a position with the employer who has terminated him? In answer to this question, the majority of the Supreme Court noted that “it is an accepted principle of employment law that employers are entitled (indeed encouraged) to give employees working notice and that, absent bad faith or extenuating circumstances, they are not required to financially compensate an employee simply because they have terminated the employment contract. It is likewise appropriate to assume that in the absence of conditions rendering the return to work unreasonable, on an objective basis, an employee can be expected to mitigate damages by returning to work for the dismissing employer.”

In assessing whether an employee should accept a position from the dismissing employer, the majority of the Court stated that an objective test will apply: “whether a reasonable person would accept such an opportunity?” While the majority of the SCC further held that such an analysis would be “multi-factored and contextual”, the primary consideration should be that the employee “not be obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation”. Some factors discussed as potentially relevant to a court’s application of the “reasonable person” test included:

• What is the history and nature of the relationship?

• Is the salary the same?

• Are the working conditions substantially the same and the work not demeaning?

• Are the personal relationships involved acrimonious or not?

• Has the employee commenced litigation?

• When was the offer of re-employment made? Prior to or following the employee’s departure from the position?

• What was the reason for the termination? In this regard, the Court noted that that persons who are terminated as a result of a change to their position (arising perhaps for legitimate business needs as opposed to concerns about performance) will be required to mitigate by returning to the dismissing employer more often than employees terminated for some other reason.

At the Court of Appeal, a significant factor in the Court’s decision was Mr. Evans’ apparent willingness to return to work on certain terms (those being a resolution of his wife’s status and a withdrawal of the termination letter) as evidence that the employment relationship had not been so harmed that Mr. Evans could not return to work. At the SCC, the majority rejected this argument, holding instead that one had to consider whether the terms sought by the dismissed employee were designed to mitigate some of the humiliation and embarrassment which would otherwise result from returning to work.

One judge, Abella J., dissented at the SCC, holding that she would have overturned the appeal court’s finding and reinstated the judge’s ruling. In writing a lengthy dissenting decision, Abella J. found that the Court of Appeal’s decision unilaterally permitted the union to transform its unlawful treatment of Mr. Evans in terminating him without notice on January 2 into a lawful dismissal on June 2, entitling him to no notice. For Abella J. such a conclusion flew in the face of the law of wrongful dismissal and the high burden of proof applicable to a defense of failure to mitigate. Abella J.’s reasons would preserve the distinction between instances of wrongful dismissal and constructive dismissal for the purposes of assessing the duty to mitigate. In addition, her reasons articulate a partially objective, partially subjective best for the analysis of the duty to mitigate, that being the perspective of the reasonable employee in the dismissed employee’s position.

Conclusion

As a result of this decision, terminated employees will have to consider more carefully any offers of re-employment received from their former employer. While this decision will be considered good news by employers, employers should not take from this decision an understanding that any offer made to a dismissed employee of continued employment with the dismissing employer will be grounds for a defense of failure to mitigate. As the Supreme Court noted, the analysis will be “multi-factored and contextual” in nature, meaning that there will no doubt be still some degree of uncertainty on the issue of mitigation for some time to come as other lower courts grapple with how to apply the majority’s reasons.

Allyson Baker