Constructively Dismissed Employee Not Required to Return to Work

Is a constructively dismissed employee required to return to work to “mitigate damages?”  This issue has attracted a great deal of judicial attention across Canada.  Since the Supreme Court of Canada decision in Evans v. Teamsters Local Union No. 31, courts across the country have held that employees can be required to return to work after being dismissed, if asked to do so by their former employers, as a way of mitigating damages.  If they refuse to do so, they risk losing all of their wrongful dismissal damages.

In a recent Ontario decision, the Court of Appeal weighed in on this issue with a decision that is quite helpful for constructively dismissed employees – finally.  In Farwell v. Citair Inc., a decision released on March 7, 2014, the Court of Appeal upheld a trial court decision that the plaintiff was not required to return to work after being constructively dismissed in order to mitigate his damages.

The plaintiff, Ken Farwell, had worked for the defendant for 38 years.  He was 58 years of age and was working as the Vice President of Operations.  The defendant restructured and transferred the plaintiff to the role of Purchasing Manager.  The plaintiff took the position that he had been constructively dismissed.  He resigned and brought a lawsuit.

The trial court judge held that the plaintiff had been constructively dismissed.    The new position would have involved a significant demotion and loss of prestige and status.  Monetarily, it would have left the plaintiff with a lower bonus even though other component of his compensation would have remained the same.  Overall, the demotion from VP Operations to Purchasing Manager was held to have been a constructive dismissal.

The defendant argued that the plaintiff failed to mitigate his damages by refusing to work out the notice period in the new position after having been constructively dismissed.  The trial court judge rejected this argument.  Morissette J. held that an employee is not required to work in “an atmosphere of hostility, embarrassment or humiliation.”  The court considered factors including “work atmosphere, stigma and loss of dignity.”  It concluded that it would have been objectively humiliating for the plaintiff to have returned to work.

On appeal, the defendant challenged several rulings of the trial court judge.

The Ontario Court of Appeal had little difficulty in concluding that the plaintiff had been constructively dismissed when he was demoted.  It also upheld the 24 month notice period quite summarily.

The real issue for the Court of Appeal was whether the plaintiff should have been required to return to work to mitigate his damages after having been constructively dismissed.  If the Court of Appeal had agreed with the defendant, it would have become virtually impossible to bring a constructive dismissal lawsuit successfully.

The Court of Appeal begins its discussion with a favourable interpretation of the Evans decision as one which promotes the efficient breach of contract.  The Court of Appeal lauds the effects of this decision, in general.

However, the Court then declines to overturn the trial court ruling on mitigation.  It grudgingly accepts that the plaintiff was not required to work in a lesser role after having been constructively dismissed since the trial court judge had held that this would have been “objectively humiliating.”

The crux of the matter, however, according to the Court of Appeal, is that the plaintiff was not asked to return and work out the notice period after having been constructively dismissed.  If the employer had asked him to return to the same position he had held, for the balance of the notice period, he would have been required to do so.  Here, the Court of Appeal held that there was no evidence of an appropriate return to work offer, after the plaintiff had been constructively dismissed.

This is quite a helpful case for constructively dismissed employees after a string of stinging defeats in courts across Canada. The decision suggests that if there is a constructive dismissal of the type that involves a significant demotion, the employee will not be required to mitigate damages by working out the notice period in the lesser role.  This contrasts with cases like Evans where the employee is asked to return to work in the same position – after being dismissed – actually or constructively.

The Farwell decision means that constructive dismissal lawsuits are still alive in Ontario.  If there is a provable case of demotion, loss of status, loss of prestige and perhaps, embarassment, the employee will not be required to return to work.  That being said, this may not be the last word on this line of cases.  Stay tuned and tread carefully.




Wins Wrongful Dismissal: But Fails to Mitigate

In another blow to dismissed employees. a B.C. court has reduced the wrongful dismissal damages that would have been owing to an employee after the employee failed to return to work when “recalled.”  This follows a number of decisions across Canada including cases in Ontario, B.C. and even at the Supreme Court.  It has become quite clear that if an employee refuses to return to work when asked to return, even after being wrongfully dismissed, it may be very risky for the employee to refuse.

In the case of Hooge v. Gillwood Remanufacturing Inc., the plaintiff was a 36 year employee, working as a production supervisor at the time of dismissal.  He was put on a “lay off” by his employer without any advance notice or pay.  The defendant company claimed that it had the right to “lay off” the employee under the B.C. Employment Standards Act.  The plaintiff alleged that he had been dismissed and sued for wrongful dismissal.  One week after he filed his lawsuit, the employer purported to “recall” him back to work.

At trial, the B.C. Supreme Court held that the employee had in fact been constructively dismissed. The plaintiff had not had a written employment contract in place.  When he was put on a lay off, he was told that it was “indefinite” and that there were no plans to recall him.  He was given an ROE that said “shortage of work.”  The B.C. court agreed with the plaintiff that there was no term of his employment that would have permitted a “lay off” without pay after all of these years of employment.  He was, in fact, constructively dismissed and was entitled to eighteen months’ compensation.

However, the Court proceeded to look at the issue of mitigation.  “The law is clear that in certain circumstances an employee who declines an offer of re-employment from the same employer after having been dismissed, whether actually or constructively, may be found to failed to mitigate his damages, and have any award reduced on account of such failure to mitigate.”  As long as it would have been “reasonable” in all of the circumstances for the plaintiff to return to work, he or she may be obligated to do so.  The court discussed Evans. v. Teamsters Local Union No. 31  as well as other B.C. cases including Davies v. Fraser Collection Services Ltd. 2008 B.C.S.C. 942 and Besse v. Dr. A.S. Machner Inc. 2009 BCSC 1216.

Ultimately, the court concluded that the evidence did not establish acrimony, mistreatment, belittling, embarrassing actions or undermining of authority in the workplace.  The court concluded that the plaintiff should have returned to the same position, on the same terms and conditions, at the same rate of pay.  Here is the court’s reasoning:

“It seems to me that an employer who has laid-off an employee, or wrongfully terminated an employee without due notice, may very well come to the conclusion, particularly with the benefit of legal advice that its actions constituted a wrongful dismissal and may seek to mitigate its own exposure to the payment of damages by offering to re-hire the employee.”

Here, the court held that the plaintiff should have returned to work.

Fortunately, in this case, all was not lost for the plaintiff.  The defendant locked out its unionized employees and ceased operations approximately seven months after purporting to recall the plaintiff.  The court held that the plaintiff would not have been paid during the lock-out, so he would not have been able to mitigate his damages during that time period.  Nevertheless, he was docked 7 1/2 months’ pay for the time period during which he would have been able to work if he had returned to work when recalled.

This case, from a B.C. perspective, reinforces the interpretation of Evans that has become the law across Canada.  Employees who are fired, laid-off or otherwise dismissed – and then offered a return to work – even after they file a lawsuit, must be very careful in deciding how to answer the employer’s offer.  Refusing to return to work and then continuing a lawsuit can be very costly.

There is something to be said for the notion that employers might have made a mistake and should be entitled to reverse a decision and have an employee come back to work.  After all, in the unionized context, an employee can be reinstated.

However, more often than not, this type of case will simply be used by a range of employers looking to play games.  Employers can try to “lay off” employees without offering anything.  Then, if the employee sues, they can “recall” the employee.  This gives employers a way to try firing someone while minimizing the risk of owing any severance.  It seems to open up the door to all kinds of abuses by the types of employers that might choose to act unethically.  Certainly, there are situations in which employers may have a good faith “change of heart” or are otherwise justified in changing their minds and reversing a decision to dismiss an employee.

But that does not necessarily seem to be the case in many of the situations I see.  This line of case law creates uncertainty, economic and emotional stress for employees, and also makes it difficult to settle some cases reasonably, both from an employee and employer perspective.  Nevertheless, employees who ignore these decisions may be making a very costly mistake.



Wrongfully Dismissed Employees May Be Required to Return to Work if “Recalled”

Can an employer “recall” an employee back to work as a way of avoiding a wrongful dismissal lawsuit?  Even if the employee was wrongfully dismissed?  Since the Supreme Court of Canada’s decision in  Evans v. Teamsters Local Union No. 31 (Joblaw blog: Evans), this has become a serious strategy for some employers, especially if the offer is seen as one that was made in good faith.

In a recent case of the Ontario Superior Court, Chevalier v. Active Tire & Auto Centre, a wrongful dismissal case brought by a 33 year employee was dismissed for failure to return to work.

The plaintiff, Earl Chevalier, a service centre manager with Active Tire, was placed on a lay-off with minimal notice and no compensation.  Mr. Chevalier wasted no time in suing Active Tire for wrongful dismissal two weeks after being dismissed.  He claimed that he could not be “laid-off” with no pay  and that this was a constructive dismissal.  In response to the lawsuit, Active Tire wrote to Mr. Chevalier, apologized and asked him to come back to work.  Mr. Chevalier elected not to return to work and instead proceeded with his law suit.

At trial, the Court agreed that Mr. Chevalier had been constructively dismissed.  Active Tire could not just lay him off with no notice after 33 years.  However, the main issue was whether Mr. Chevalier should have been required to return to work in these circumstances.  He argued that Active Tire had tried to “make his life miserable” in the period leading up to his dismissal and he therefore would have had to return to work in an atmosphere of “hostility, embarrassment or humiliation.”

After reviewing the evidence, the Court rejected Mr. Chevalier’s claims.  It held that a “reasonable person” would have returned to work in all of the circumstances.  Mr. Chevalier was not able to demonstrate to the Court that his workplace had become intolerable and he was therefore required to return.

If Active Tire had not called Mr. Chevalier back to work, the Court ruled that he would have been entitled to 16 months’ compensation – the time period it took Mr. Chevalier to find new employment.  However, the result in this case was that he was not entitled to anything and was required to pay legal fees to Active Tire, as well as his own.

This case is an example of the risky nature of wrongful dismissal litigation.  It illustrates the importance of obtaining proper legal advice and following it.  Under current Canadian case law, employees who are dismissed or laid off off must seriously consider an employer’s offer to return to work, if it is an offer made in good faith.  Important points to consider may be:

  • Is the offer to return an offer for the same position that the employee held?
  • Will the pay and working condition remain the same?
  • Is there significant evidence of conduct that is embarrassing or humiliating?
  • Does the employee have other employment possibilities?

Dismissed employees should carefully review all of these issues, as well as other related matters, with competent employment law counsel.  Making the wrong decision can be costly and harsh.

Forced to Return to Work After Being Wrongfully Dismissed: Evans v. Teamsters Local Union No. 31

2008 was not a banner year for employee rights in Canada. The Supreme Court of Canada issued four employment law decisions all of which sided in favour of employers. Viewed collectively, the decisions show a pendulum shift by Canada’s highest Court away from protecting the rights of “vulnerable employees” and towards providing employers with greater freedom to manage and protect their workplaces. Losing these networking opportunities can be devastating. Attending these functions after being dismissed can be difficult and disheartening. Since many of us define ourselves to some degree by our work, unemployment creates a loss of part of our identity. The Supreme Court of Canada has recognized this problem, referring to work as an essential component to our sense of identity, self-worth and emotional well-being.

The decisions are likely to generate a high volume of litigation as employees and their former employers struggle to demarcate the new boundaries over some significant issues. The challenge for dismissed employees will be to find creative ways of getting around some of the implications of these decisions, while ensuring that their own conduct does not run afoul of the technical requirements of some of these cases.

This four part series of articles reviews and comments on these decisions.

Evans v. Teamsters Local Union No. 31Forced to Return to Work after being Wrongfully Dismissed

The Supreme Court’s 6-1 decision in Evans v. Teamsters is one of the harshest, pro-employer decisions issued by this Court in quite some time. Although the particular facts in this case probably narrow the implications of the decision, the Supreme Court nevertheless provides some comments which will concern many dismissed employees.

Evans had worked for the Teamsters for more than 23 years as a business agent in Whitehorse. He was dismissed following the election of a new union executive, which he had opposed during the union’s election process. The union terminated Evans’ employment and then asked to open negotiations. When the parties could not come to a deal, the union insisted that Evans return to work for 24 months of “working notice”. Evans refused to return to work. The union took the position that he had failed to “mitigate his damages” by refusing to return to work for the notice period.

The majority of the Supreme Court indicated that the appropriate question in this circumstance is whether a reasonable person would agree that the dismissed employee should be expected to return to work for his or her employer in all of the circumstances after being dismissed. The Court cited the requirement to consider work atmosphere, stigma and loss of dignity as well as nature and conditions of employment. However, the Court held that these questions should all be resolved by looking at an “objective” standard rather than a “subjective one”.

In this particular case, Evans had a number of concerns that would seem to have justified his concerns about returning to the workplace. After all, he had been dismissed by a newly elected union executive after siding with the losing side in a hotly contested election. He had what appeared to have been genuine concerns that the workplace would have been poisoned for him. These issues were all reflected in findings by the Trial Court.

Instead of accepting the Trial Court’s findings, the Supreme Court and the Court of Appeal overturned these factual findings even though that is generally not the focus of an Appellate Court. In particular, the Supreme Court focused on a letter that Evans had written in which he had said that he was willing to return to work if certain preconditions were met. Ultimately, the Supreme Court made a factual finding that “the relationship between Evans and the Union was not seriously damaged” and, “given that the terms of employment were the same, it was not objectively unreasonable for him to return to work to mitigate his damages”.

Justice Abella was the lone dissenting judge – and the lone glimmer of hope for dismissed employees facing this type of situation. She highlighted the fact that the Trial Court Judge had found nine reasons why it would be unreasonable for Evans to return to work and that generally it is not an appellate court’s role to overturn these types of facts.

For Justice Abella, the major issue here was whether or not it would be reasonable for Evans to be required to return to work. Justice Abella noted that employees cannot be forced to work against their will – and to continue to be required to work in an atmosphere not conducive to appropriate “personal relations” would be inconsistent with the law as it currently stands.

The end result as summarized by Justice Abella was that Evans was in effect fired twice. First he was fired without cause, which should have meant providing him with a reasonable notice period. Then he was dismissed with cause and not paid anything for refusing to return to work for the employer that had chosen to dismiss him. The conclusion is that a 22 year employee is left with no compensation because of the way he was dismissed and manipulated by his former employer.

As a practical matter, it may well be true that few employers will want to have their dismissed employees return to work for a lengthy notice period – especially where they have already chosen to issue a notice of dismissal instead of providing the employee with a period of working notice. However, employers may be able to use the Evans decision as a bargaining lever by threatening to recall employees to work out a notice period if they refuse to accept severance arrangements. Dismissed employees will have the obligation of showing why it would be objectively unreasonable to have to return to work for the employer that has just dismissed them

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