When is an employee required to accept an offer to return to work following dismissal? The Ontario Court of Appeal addressed this question in Farwell v. Citair, Inc.(General Coach Canada). The court held that an employee does not have a duty to mitigate by returning to work following dismissal unless the employer offers the other position to the dismissed employee after termination.
The court discussed three issues in this case: constructive dismissal, notice period, and mitigation. With regards to constructive dismissal, the appellant, Citair, Inc., was found to have wrongfully dismissed the respondent, Mr. Farwell, when he was demoted from Vice-President of Operation to Purchasing Manager. A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee. The employee can then treat the contract as wrongfully terminated and resign. This situation gives rise to an employer’s obligation to provide damages to compensate for reasonable notice.[1]
With regards to the notice period, the court upheld the trial judge’s finding that Mr. Farwell was entitled to 24 months’ notice, given his age, length of service as an employee and the character of his employment. Mr. Farwell was 58 years of age and had been employed for 38 years. He had a high level managerial position and had been very dedicated to the company.
Mitigation was the most contentious issue in this case. The appellant argued that Mr. Farwell had a duty to mitigate his damages and that he was obligated to accept the job offer of Purchasing Manager during the notice period. However, the court upheld the trial judge’s decision that Mr. Farwell could not be obliged to mitigate by working in an atmosphere that would be embarrassing or humiliating for him.
The appellant further argued that the demotion was motivated by economic considerations and not by any animosity towards Mr. Farwell. Restructuring the company’s management personnel was an attempt to change the company’s business model in tough economic times and was not meant to stigmatize Mr. Farwell. The appellant argued that in circumstances where the employer’s restructuring serves a legitimate business interest and is not merely a pretext for terminating an employee, an employee like Mr. Farwell should be obliged, as part of his duty to mitigate, to return to work for the same employer. The court considered the argument as an aspect of “efficient breach”.
Although the court seemed inclined to agree with some of the appellant’s arguments, it ultimately dismissed the appeal and upheld the trial judge’s decision due to an insurmountable obstacle the appellant faced. The court noted that “the appellant’s mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the Appellant that he was treating the reorganization as constructive and wrongful dismissal.”[2] In this case, the appellant did not give such an offer to Mr. Farwell. Therefore, Mr. Farwell did not breach his duty to mitigate by not returning to work.
[1] Farwell v Citair, Inc. (General Coach Canada), 2014 ONCA 177 at 3.
[2] Farwell v Citair, Inc. (General Coach Canada), 2014 ONCA 177 at 20.
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