When must a dismissed employee accept an offer of alternate employment with their employer? In some circumstances, employees will be obligated to accept continued employment with the company that terminated them to mitigate their losses. A recent Court of Appeal decision reminds us, however, that an employer’s offer must meet certain conditions or else the employee may refuse to accept it.
In Fillmore v. Hercules SLR Inc., the employee was 51 years old, and had worked for the employer for 19 years as director of purchasing. He received a salary of about $82,000. The employer decided to restructure, and terminated the employee without cause.
The employer offered him a severance package consisting of his statutory minimum entitlements, in exchange for a full and final release. It also offered him a new permanent, full-time position as the supervisor of service, at a salary of more than 20% less than his current salary. That new employment offer also included a 6-month salary guarantee at his old salary to help him transition. The employee declined both offers.
At trial, the employer argued that by failing to accept the new employment offer, the employee had failed to meet his duty to mitigate. The motion judge, in dismissing this defence, found that the new employment offer was significantly lower than the employee’s former salary. The court also found that the employer had not told the employee that the new employment offer was also an offer to work during the notice period, and so he didn’t have to waive his right to claim wrongful dismissal by accepting the offer. In effect, the employer sought to obtain a release through the “back door”.
In upholding the motion judge’s decision, the Court of Appeal reiterated that where an employer offers an employee the chance to mitigate damages by returning to work in some capacity, the central issue will be whether or not a reasonable person would accept such an opportunity. A reasonable person would not have given up his ability to pursue his rights.
During restructuring, employers may attempt to limit their liability by providing employees with an opportunity to perform alternative work during their notice period. However, as this case illustrates, where the offer is not on substantially similar terms (particularly financially), employees may not be obliged to accept.
In this case, after the employee rejected the new, permanent position, the employer should have offered him the opportunity to work out his notice period in his previous position, expressly without prejudice to his ability to pursue his claim for wrongful dismissal.
It is also important to bear in mind that other factors may cause a reasonable person to decline an offer of alternate employment. Employees are not required to mitigate by returning to work in an atmosphere of hostility, embarrassment or humiliation. Such an atmosphere may be created by a significant reduction in compensation, a demotion, or an overall loss of status or prestige even when compensation remains the same.