Monday, June 18, 2012

Toyota Service Manager Should Have Mitigated

Justice Belobaba recently released a decision in the case of Ghanny v. 498326 Ontario Limited, and summed up the case quite concisely at paragraph 1.
You’ve been a valued employee for 18 years. One day you’re told that you position is being eliminated at the end of the month but that another job at a related company is available – the same kind of position with the same pay. You’re upset and not thinking clearly and you turn down the replacement job offer. You sue for wrongful dismissal. You eventually find other work but at a much lower position and salary. When the events are replayed at trial and are viewed more objectively, you realize that you should have taken the offered position, that in failing to do so you didn’t mitigate your losses and your action for wrongful dismissal will probably not succeed.
That's essentially the fact pattern.  The owner of Downtown Toyota acquired a Suzuki dealership and reorganized his staffing, telling Mr. Ghanny that his job as Service Manager was ending, but he could take the Parts and Service Manager job at Suzuki, with the same compensation package.  Mr. Ghanny refused, and commenced a wrongful dismissal action.  His concerns included, among other things, that the Suzuki business was smaller, less secure, and a smaller department that he would manage, and also that he would lose the benefit of his 18 years' seniority.  (It is unclear whether his seniority had any impact other than notice of termination.)  There was conflicting evidence on this point, though - management said that they made it clear that his seniority would be carried over.  Management also insisted that they promised job security.  The Suzuki dealership did close 22 months later, but its employees were absorbed by other related companies.

It appears that the different dealerships were operated by separate (albeit related) corporations.

Justice Belobaba concluded, that, whether this is framed as a wrongful dismissal action or a constructive dismissal action, it had to be dismissed because Ghanny should have mitigated his loss by taking the new position.  He applied the framework at play in cases like Evans and Mifsud, which I have discussed before. See this entry for an explanation of the mitigation framework in these cases.

There's also some very interesting obiter:  After the parties got lawyers involved, the employer's counsel made it clear that the Suzuki job was still open, including accrued seniority.  The employee's counsel responded with conditions:  Downtown Toyota had to guarantee Ghanny's salary and benefits; lost wages and costs to that date had to be addressed; and the plaintiff had to be permitted to continue his law suit.

The employer refused these conditions.  The Court concluded that it was unreasonable for Ghanny to insist on the first two conditions, though the third condition was a "legitimate entitlement and the former employer would have been wrong to insist otherwise".  (Frankly, I'm not sure why one would require A, B, *and* C.  If you're continuing the law suit, you're still chasing remedies A and B.  If you get A and B, you don't need to continue the law suit.)  But the Court considered the initial failure to mitigate to be determinative in any event.

My Thoughts

I've noted in the past that I have concerns about the "mitigation with the same employer" cases.  In essence, it often results in the conclusion that the employer unilaterally implemented changes outside of its rights, but the employee should have accepted the changes anyways.  I feel that this is incoherent, and the tests need to be streamlined:  Either an act is a constructive dismissal, and the employee is entitled to quit and seek damages, or it isn't a constructive dismissal, and the employer was entitled to so act.  None of these analytical acrobatics, finding that an act was a constructive dismissal, but the job was still equivalent for the purposes of mitigation and accordingly the employee should have stayed while seeking new employment.

The simple fix, which makes sense from a first principles approach, is that where a unilateral change by the employer has so modified the employment relationship as to create a constructive dismissal, the changed job must inherently be so different as to render it 'not equivalent', such that the mitigation principle will not require the employee to accept the position.  (Reading the other mitigation jurisprudence, one would think that, if anything, mitigation would permit the employee more flexibility than the constructive dismissal doctrine.)  This could involve moving the constructive dismissal threshold up, or lowering the duty to mitigate.

That being said, I think that this case is probably rightly decided, and yet it still raises similar concerns for me.

First and foremost, this case has to be considered in the same context as the constructive dismissal cases, even though it may not strictly be a constructive dismissal case itself.  Because we're talking about related employers, treating them as being actually different would result in arbitrary distinctions.  So I'm glad that the judge felt that it didn't make a difference.

But the judge goes on to note, also in obiter, that even had he believed that Ghanny's seniority would have been lost by the transfer, it wouldn't have made a difference.  It was still unreasonable not to accept it.

If that's right, then the Machtinger line of jurisprudence (i.e. you can't enforce a contract without fresh consideration) dissolves entirely into having all procedural content and no substantive protection for anyone (except for lawyers, I suppose).  It would mean that an employer who is concerned about the notice entitlements of a long-service employee is entitled to simply terminate an employment contract without notice (or on the minimum notice in the ESA) and offer the same job but with different terms, which means that the continued job is 'fresh consideration', and the employer is insulated from a wrongful dismissal suit because of the employee's duty to mitigate.

Finally, some commentary is called for about the employee's imposition of conditions on returning to work.  On these facts, the judge is right - the initial failure to mitigate is determinative, and the subsequent discussions don't matter.  But if one supposed that there hadn't been an initial failure to mitigate, Justice Belobaba is suggesting that the imposition of conditions would still have resulted in a failure to mitigate.

Let's suppose for a moment that you have a wrongfully dismissed employee suing 3 months after the dismissal, and then being offered his job back.

What Justice Belobaba is saying is that the employee is entitled to insist on continuing the law suit - i.e. he can't be required to waive his rights to sue - but he is not entitled to make his due entitlements a condition of accepting the job.  Respectfully, I can't agree that the objectively reasonable expectation is that the employee will take the job back under those circumstances.  Even if there wasn't an acrimonious relationship before...he's suing them now.  It's hard enough to imagine an employee suing his or her current employer while remaining employed (though it has happened).  Saying that an employee is expected to take the job while having to pursue litigation for the unpaid three simply not realistic.

Jack already owes Jill money from breaching a previous contract.  Jill has commenced litigation against Jack to get paid.  Jack now wants Jill to enter into another contract.  Jill responds, "Pay up what you already owe, then we'll talk."  To me, that seems like an eminently reasonable response in any context.  (Indeed, to me, it seems reasonable to insist on additional protections in the new contract to protect Jill's interests in case of another breach.)

Anyone disagree with me on that?


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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