In recent years, I've frequently commented on the growing body of law requiring employees to accept different conditions with their existing employer, as mitigation for constructive or actual dismissal - the logic being that they were constructively or actually dismissed, but a reasonable person would nonetheless have kept the job and accepted the modified conditions, while seeking replacement employment.
There's a recent case from the Ontario Superior Court of Justice, Bannon v. Schaeffler, distinguishing those cases.
Mr. Bannon worked for Schaeffler Canada Inc./FAG Aerospace Inc., starting in September 1972 at age 19. He started as a machine operator and later became a 'setter'. In 1991, he participated in a pilot project to reduce set-up times; in 1996 he became part of a team to improve efficiency. From 2001 forward, he was a "Set-Up Time Reduction Coordinator", developing procedures, giving workshops, instructing setters, etc.
As we all know, the economy tanked in 2008. This affected the employer's business significantly, and on April 29, 2009, he was advised that his job was being eliminated, but under the employer's Lay Off and Recall Policy that he was entitled to exercise seniority rights and take a position as a setter again. (In union contexts, this is known as 'bumping'.)
This would have entailed a pay cut (by a little over 10% of his hourly rate), a return to shiftwork, and a return to highly physical labour.
Mr. Bannon wasn't sure that he would be able to perform the duties of a setter. Aside from the fact that much had changed technologically from when he had last performed those duties, he was now 56 years old, with significant back problems, and didn't believe that he would have the strength or agility required for the job.
Accordingly, he declined the new position, and on April 30, 2009, the employer terminated his employment, providing him with 34 weeks' pay (being the statutory minimum in his case).
The employer argued that the employee failed to mitigate his losses by not accepting the setter position. After all, with no acrimony and no bad faith, it fell squarely within the framework for cases such as Evans v. Teamsters and Mifsud v. MacMillan Bathurst Inc. However, Justice Haines distinguished those cases concluded that, given Bannon's physical limitations, the employer had not satisfied its onus of establishing that it was unreasonable for Bannon to reject the setter position.
Bannon was awarded an overall notice period of 20 months.
Obiter Dicta: Is the Mitigation Issue Engaged?
There's a bit of obiter in the decision which is somewhat awkward.
There are similar elements here to the case of Silva v. Leippi from British Columbia in 2011: In that case, the business was being sold, and the purchasers offered new terms of employment for Mr. Silva; Mr. Silva turned around and tried to negotiate the terms, which had the effect of implicitly rejecting the initial offer. They couldn't come to terms, and he was dismissed. The Court found that he had failed to mitigate, by rejecting the offer of modified employment.
The Silva case is very odd, for a number of reasons, most importantly that it imposed an obligation to mitigate prior to any breach of contract. This is inconsistent with the first principles of contract law, and I was very concerned about that decision when I first saw it.
Bannon's counsel picked up on a similar argument in this case: When Bannon rejected the setter position, his existing employment contract had not yet been terminated, and therefore no obligation to mitigate arose. He went on to propose an alternate framework for such cases, pointing out the traditional analysis of constructive dismissal cases as set out by the Ontario Court of Appeal in Wronko:
When an employer attempts to make a unilateral change to a fundamental term of the employment relationship, an employee has three options:
- The employee can accept the change, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.
- The employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term.
- The employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee on notice, or may acquiesce by permitting the employee to continue to fulfil his or her duties.
Bannon's position was that he had opted for #3, which put the employer in a position of either having to acquiesce and let him stay in his old position, or dismiss on reasonable notice.
It would have been open to the employer to dismiss, and then to offer him new employment as a setter, in which case Bannon would have been obligated to consider the new employment in context of his duty to mitigate. But until the dismissal, there was no duty to mitigate, and therefore a rejection of an offer prior to the dismissal can not have breached the duty. And the employer did not make a new offer of employment following the dismissal, which Bannon would have to consider, in light of his obligation to mitigate.
Such is the plaintiff's argument, and it seems sound to me. Justice Haines, however, rejected it, finding that he was effectively terminated from one job and offered another in replacement. It is not entirely clear from the decision, but it appears that Justice Haines considered the employment contract to be effectively repudiated when they told him that his job was eliminated and he could take the position of a setter.
I question this analysis: It is directly inconsistent with some very well-established doctrines of wrongful dismissal regarding the requirements for notice of dismissal. Having a discussion about a position being eliminated is not effective notice of dismissal, much to the chagrin of many an employer. Effective notice must include when the contract will end, and must be clear and unambiguous. It's hard to imagine such a notice being effective when not in writing. The fact that he showed up for work on April 30, 2009, suggests strongly that he didn't take from that meeting that his position, as of that moment, did not exist.
Put another way, there's no reason to think that it wasn't open to the employer, as of April 30, 2009, to provide actual notice. Which is not, in fact, a repudiation of the contract, but which is an affirmation of it. Actual notice does not breach the contract, and therefore does not cause the duty to mitigate to arise.
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.