Constructive Dismissal Damages and Duty to Mitigate

In a recent Ontario employment law court case, a few important topics were addressed, including constructive dismissal, the validity of a termination clause in an employment contract, and an employee’s duty to mitigate in a wrongful dismissal claim.

Facts

The plaintiff, a heating, ventilation and air conditioning (HVAC) employee with 7 years of service, was informed by his employer on March 30, 2021 that his company-paid vehicle would be taken away at the end of April 2021. On April 29, 2021, the employee’s employment lawyer advised the employer that the employer’s refusal to continue paying for the company vehicle and maintenance costs amounted to a reduction of more than 30% of his annal compensation, resulting in his constructive dismissal. As such, he submitted his resignation from employment, effective May 14, 2021.

On May 11, 2021, the employee listed his home in Oshawa for sale, as he testified that without his job, he could not afford to maintain his home. He then moved to his partner’s home in another town called Omemee, which was approximately 70 km. and would have added an additional 80 minutes of commuting time per day. On June 18, 2021, the employer offered to re-employ him to perform the same duties on the same terms and conditions of employment prior to the constructive dismissal, and also pay his lost salary from his resignation date until his return to work. However, the employee declined this offer because he had already sold his Oshawa home, and the commute from Omemee to the employer was approximately 90 minutes to two hours each way.

Decision

Removal of Company Vehicle was a Constructive Dismissal

The Court held that the employer’s “unilateral cessation” of the company vehicle funding (which represented approximately 21% of the employee’s total compensation) constituted constructive dismissal. As a result, the employee was entitled to reasonable notice of termination (financial severance package). In reaching this conclusion, the court relied on similar case law on this point which have found that an employer cancelling such a significant aspect of an employee’s compensation constitutes constructive dismissal, including Farquhar v Butler Brothers Supplies Ltd. (1988), 1988 CanLII 185(BC CA), at p. 4; Maver v. Greenheat Energy Corporation, 2012 BCSC 1139, at para. 25; Ziten v Sadie Moranis Realty Corporation, 2015 ONSC 7987, at para. 32; Drake v. Blach, 2012 ONSC 1855, at para. 23; Pavlis v. HSBC Bank Canada, 2009 BCSC 498, at paras. 52 and 53.

Employee’s Duty to Mitigate

It is well established that in wrongful dismissal cases, employees are obliged by law to mitigate the damages that flow from the wrongful dismissal by seeking an alternative source of income in the absence of a pre-determined fixed notice period or other agreement to the contrary in an employment contract.

If employers can prove that a wrongfully dismissed employee did not fulfill this duty to mitigate, it allows them to reduce how much they have to pay the employee in a severance package. However, this is a high burden for employers to meet:

“The onus is on the defendant to establish a failure to mitigate. More particularly, the onus is on the employer to prove that the employee would likely have found a comparable position reasonably adapted to his or her abilities and that the employee failed to take reasonable steps to find that comparable position. In assessing the innocent party’s efforts at mitigation, the courts are tolerant, and the innocent party need only be reasonable, not perfect.”

So, in this case, the employer argued that the employee failed to mitigate his damages in two respects:

a. first, by refusing the employer’s June 18, 2021 offer to return to work at his previous job with the fully paid vehicle for one year; and

b. second, by moving from his home in Oshawa to Omemee, where there were fewer jobs in his field.

In addressing the employer’s first argument, the Court held that had in normal circumstances, the employee would have been legally required to accept the employer’s offer to return to work given it was substantially the same as before he resigned, and because there was no evidence of any animosity, he could not argue returning to work would be “too embarrassing, humiliating and/or degrading.” In fact, the employer’s offer to have the employee get his old job back was effectively a complete capitulation on their part”.

However, the problem was that the employee the employer’s offer of re-employment simply came “too late in the game” as the employee “had already moved.” In fact, given the circumstances, the employee was justified in refusing the offer to go back to the employer because his daily commute to work became “too long and too far”:

“an additional 40 minutes per commute (80 minutes per day) when the commute is already around one hour each way, is one that a reasonable person could decline: Maasland v City of Toronto, 2015 ONSC 7598, at para. 41, aff’d . Maasland v. Toronto (City), 2016 ONCA 551, at paras. 12 and 13.”

Moreover, the court referred to the fact that the employee had already commenced litigation when the offer of re-employment, which was a factor that must be considered, but was not determinative and does not preclude a finding that a reasonable employee in his position should have accepted the offer of re-employment (Gent v. Strone Inc., 2019 ONSC 155, at para. 51.)

In sum, the court held:

“In this case, I have concluded that Mr. Quesnelle was constructively dismissed on March 30, 2022, and resigned from his employment on May 14, 2022, in response to that constructive dismissal. Once he resigned, he no longer had a reason to live within commuting distance of Camus’ headquarters in Mississauga, and, subject what I say below when I consider the question of mitigation more generally, he was free to move.

Had Mr. Quesnelle not yet moved to Omemee, he would have been obliged to accept Camus’ offer of re-employment in mitigation. But Camus’ offer simply came too late in the game. Mr. Quesnelle was not obliged to remain in his Oshawa home after May 14, 2021 in the hope that he might one day receive an offer of re-employment from his former employer.”

On the second mitigation issue, the Court reduced the 10-month notice period to seven months because of the employee’ decision to move away from the GTA job market, where he would have had a better opportunity to obtain new employment. As the court noted:

“Camus’ evidence is that had Mr. Quesnelle remained in Oshawa there would have been significantly more job opportunities – 40 or more – available within an 80 km. search radius. I accept this evidence.

In my view, Mr. Quesnelle’s decision to move from Oshawa to Omemee reduced his ability to mitigate his damages. This was a personal decision, but the employment consequences of that decision should not be visited upon Camus.

General Points

The court made important comments regarding how the employee’s duty to mitigate is triggered by a case of constructive dismissal. Specifically, it said:

“In order to trigger this form of mitigation, the employer is obliged to offer the employee a clear opportunity to work out the notice period after the employee has informed the employer that he is treating the change in his contract as constructive and wrongful dismissal: Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177, at para. 20; Dussault v. Imperial Oil Limited, 2018 ONSC 1168, at para. 58.

The offer of re-employment does not, however, change the fact that the employer wrongfully breached the contract of employment. It can only serve to provide an opportunity for the employee to mitigate his loss resulting from the breach, in whole or in part, by accepting the offer if, objectively viewed, it is reasonable to do so”: Hooge v. Gillwood Remanufacturing Inc., 2014 BCSC 11, at para. 89.“

Call a Toronto Employment Lawyer

In Ontario employment law, it is always prudent for employers (and employees) to speak with an experienced employment lawyer when they would like to know what legal rights you have as an employer or employee in Ontario. If you are an employee who believes you were wrongfully dismissed or want to negotiate your severance package, please speak with our experienced wrongful dismissal lawyer in Toronto regarding your legal rights and options as an employee, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

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