Tuesday, March 27, 2012

Constructively Dismissed Bank Manager Didn't Fail to Mitigate

I've posted before about constructive dismissal, and about the application of the mitigation principle to the doctrine.  In addition to having to prove that the employer effectively repudiated the employment contract, a constructively dismissed employee must often meet the additional challenge of establishing that it was reasonable not to continue in the job anyways.

The idea is this:  When a contract has been breached, an innocent party can sue for the damages which flow from the breach, but is obligated to take reasonable steps to limit those damages - you can't recover for avoided losses, or for losses which should have been avoided through reasonable diligence.  Normally, in wrongful dismissal, that simply requires a plaintiff to take reasonable steps to find a new job.

However, in constructive dismissal, the Courts ask whether or not reasonable mitigation would have entailed staying with the old employer despite the constructive dismissal.

This isn't going to be the case where the constructive dismissal is generated by ongoing harassment or a poisoned work environment, and the clearest case where there may be a failure to mitigate is one where an employee is substantially demoted but without a pay cut and where the demotion is not a reflection of performance.  (Imagine that I'm the manager of a facility with a large number of employees, and my employer decides to restructure and close the facility due to changing economic conditions, and finds another place for me with a much lower level of responsibility, but maintains my compensation structure intact.  It's a big step down for me in terms of responsibility, but I'm still making the same money.  So if I quit, foregoing the remunerative employment still being offered by my employer, the Court's conclusion may be "Yes, you were constructively dismissed, but the reasonable thing to do under the circumstances is stay in the job until you find something better.")

I've been fairly critical of this doctrine.   I think there's something dissonant about saying that the employer is not entitled to implement a particular change, but is nonetheless entitled to expect the employee to accept it.  But that's the way the law has fallen, and that doctrine has been applied to the detriment of a number of employees.  But the doctrine is starting to get fleshed out a little bit more, including the limitations on the doctrine.

The Court of Appeal released a decision today in Chandran v. National Bank of Canada, upholding the trial court's decision that Chandran's choice to treat his employment relationship as being at an end was not a failure to mitigate.

Chandran was employed by the bank for 18 years, and was a senior manager at the bank's Commercial Banking Centre in Vaughan.  He had moved up the corporate ladder pretty smoothly, and received excellent performance reviews.  He reported to the Vice-President of Ontario Commercial Banking, Mr. Flowers, who was tasked with improving the substandard performance at the Commercial Banking Centre.  Flowers asked the HR Manager to embark upon an employee satisfaction survey.  The result was that 9 of 11 employees alleged bullying behaviour of Mr. Chandran.  Flowers concluded that it was necessary to remove Chandran's supervisory responsibilities; he issued a disciplinary warning to Chandran which relieved him of his duties as and presented him with two alternative postings of comparable remuneration and prestige, but without supervisory duties.  (The salary and benefits would have remained the same for the relevant period of time, though his target bonus would have been reduced from 17% to 15%.)

The discipline was an important factor in this case.  Even though the changes to his remuneration were relatively minor, the reassignments were still a demotion, and combined with the discipline could actually hinder his ability to find a new job equivalent to his old position; accordingly, it was reasonable for him to decline to take either of the offered positions in mitigation.

The Court of Appeal dismissed the employer's appeal relatively summarily, concluding that this was a finding of fact entitled to substantial deference, and that there was no palpable and overriding error warranting appellate intervention.


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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