Corporate restructuring is often accompanied by lawsuits by jilted employees claiming constructive dismissal. In a recent case, the Ontario Court of Appeal looked at the intersection between constructive dismissal and a dismissed employee’s duty to mitigate.
As part of a corporate restructuring, the Plaintiff was reassigned to the position of Purchasing Manager from his former position of VP Operations. The Plaintiff had previously excelled in the position of Purchasing Manager prior to being promoted. Although this change of position did not entail virtually any change in the Plaintiff’s salary or working conditions, it did represent a loss of prestige and a reduced role in the company.
The Plaintiff brought a claim for wrongful dismissal, alleging that he was constructively dismissed. At trial, the Court allowed his claim and he was awarded 24 months’ notice.
The Defendant appealed.
The Court of Appeal firmly upheld the finding of constructive dismissal and the 24 month notice award.
On the question of mitigation, the employer argued that in order to mitigate his damages, the Plaintiff should have accepted the position of Purchasing Manager for the duration of the notice period.
The employer relied on a case called Evans v Teamsters which confirmed that a constructively dismissed employee may be obligated to accept a lesser job with their employer to mitigate while looking for alternate employment, if a reasonable person would be expected to do so. Failure to do so would be a breach of the employee’s duty to mitigate their damages. However, an employee is not obligated to accept the lesser job if by doing so they would be working in an atmosphere of hostility, embarrassment or humiliation.
The employer argued that none of those factors were present. All of the employer’s witnesses spoke highly of the Plaintiff, particularly with respect to his work as Purchasing Manager, and the evidence was that the reorganization was entirely related to a shift in focus of the company to a product line with which the Plaintiff was unfamiliar. The entire process was not intended to stigmatize the Plaintiff.
The Court of Appeal indicated that the defence had merit. However, they denied the appeal on the ground that the employer failed to advise the employee – after he rejected the unilateral demotion – that the position remained available, even if only while he looked for work elsewhere.
What Employers Should Know
The cases in which the principle outlined in Evans is applicable are narrow. However, it is essential that employers make it clear to an employee who rejects the change (whether it is a demotion or otherwise) that the position remains available. Otherwise, the employee cannot be held to have failed to mitigate by failing to accept it.