eCaseNote 2012 No. 05

The Duty to Mitigate: What All Employers and Employees Need to Know Part I

Silva v Leippi, 2011 BCCA 495 Ghanny v 498326 Ontario Ltd, 2012 ONSC 3276



Introduction

Every employment contract contains a term either express or implied that, absent cause, an employer must give reasonable notice to an employee before dismissing him or her. What is considered reasonable depends on various factors such as the employee’s age, years of service, level of authority, difficulty of finding similar employment, etc. If an employer terminates an employee’s position without proper notice, the employee can launch an action against the employer for wrongful dismissal. If successful, the employee will recover damages resulting from the breach.

In determining whether an employee is entitled to damages, the court will look at whether the employee has discharged his/her duty to mitigate. The common law requires dismissed employees to remedy their situation as best they can. This means that a terminated employee is expected to make reasonable efforts to seek out alternative sources of income. If they fail to mitigate their situation, their damages will be reduced, if not eliminated completely.

Recently, there have been several cases before Canadian courts dealing with an employee’s duty to mitigate. This two-part series will discuss these cases and what they mean for both employers and employees. Part I of the series will focus on the extent of the duty to mitigate and what that duty requires from an employee in certain circumstances. Part II of the series will look at a recent decision of the Ontario Court of Appeal that may, depending on the employment situation, eliminate the duty altogether.

Does the duty to mitigate require an employee to accept an offer of employment from a purchaser of the business?

In Silva v Leippi, the issue for determination was whether the duty to mitigate required Silva to accept a job offer from the new owner of the business. The Defendants terminated Silva’s employment without notice when they sold their vehicle repair and salvage business. Silva had worked at the salvage business for four years. Wanting to retain Silva as an employee, the purchaser offered him employment. Silva refused to accept the offer of employment unless his wages were increased by 33%. The purchaser did not agree to the wage increase and did not employ him.

Both the British Columbia Supreme Court and Court of Appeal dismissed his claim. In determining whether it was unreasonable for Silva to refuse the offered position, the appellate court affirmed the standard set down by the Supreme Court of Canada in the 2008 case, Evans v Teamsters Local Union No. 31., that a reasonable person is expected to accept a job offer where “the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious.” If a dismissed employee does not accept such an offer there will be a finding of failure to mitigate.

In Silva, the court affirmed that the position offered to the Plaintiff passed the standard set out in Evans. Therefore, the Plaintiff had acted unreasonably in not accepting the job offer. His failure to mitigate by refusing employment thereby disentitled him to damages for wrongful dismissal.

Does the duty to mitigate require an employee to accept a replacement job offer from the same employer who dismissed the employee?

In Ghanny v 498326 Ontario Ltd, Ghanny launched an action against his employer after he was dismissed without notice. Ghanny had worked as a service manager with the Defendant car dealership for 18 years. The owner of the dealership dismissed Ghanny from his current job, but informed him that he would be relocated to a new dealership under the same ownership just a few blocks away. The employer assured Ghanny that he would have the same responsibilities, seniority and compensation package he had at his present job.

Ghanny, fearing that the future of the new dealership was uncertain, refused the job offer. In determining whether Ghanny acted reasonably in rejecting the position, the Ontario Court again applied the test in Evans. Finding that the salary and working conditions were the same, the work not demeaning, and that the personal relationships involved were not acrimonious, the Court held that it was unreasonable for Ghanny to reject the job offer. Even if Ghanny’s concerns about the future of the new dealership were founded, he still had a duty to mitigate his losses by accepting the job. The Court determined that his failure to mitigate disentitled him from an award for damages and dismissed the action.

A failure to mitigate can be detrimental terminated employee’s claim. Therefore, it is vital that employers and employees know what the duty to mitigate is and what the duty involves. That being said, depending on the employment situation, an employee may not be under any duty to mitigate. What kind of employment situation eliminates the duty to mitigate? Stay tuned for Part II of this series for the answer to this exact question.



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