Saturday 21 September 2013

Hard Times: Economic Downturn, Judicial Discretion and the Duty to Mitigate

A few weeks ago this blog afforded an opportunity to an individual looking for work in employment law to write a guest blog post. Perhaps not surprisingly, following that post I was contacted by others in a similar situation looking to be afforded a similar opportunity.

This blog and, more to the point, Sean Bawden, are humbled by the success of this blog and by the request from others to write guest posts for it. Having given the issue some thought, the blog will continue to post articles by those looking for work in the employment law field in Ontario - provided that the posts meet certain quality standards. Whether those posts move to a separate page is an issue that will have to be considered; for now, they will appear on the main page.

What follows, then, is a post written by Paul Willetts on the subject of the duty to mitigate in today's economy. Commentary by this blog will follow and any comments by this blog are added in square brackets.

*By Paul Willets

"Constructive dismissal" is an umbrella term that describes a wide-range of possible conduct. It may manifest as a reduction in overall compensation, a demotion, a change in job title, callous treatment by management, a change in hours of work or a new work location. In essence, it describes an employer’s unilateral decision to make a fundamental change to the employment relationship – a change to which the employee has neither agreed nor condoned. (Farber v. Royal Trust Co., [1997] 1 SCR 846)

When employees allege constructive dismissal they must mitigate any losses that flow as a result of the employer’s breach. Basically, if you think that you’ve been fired, you cannot then sit at home and claim unending lost income; you must make best efforts to find alternate replacement employment. A failure in this regard will limit any damages claim and effectively minimize the employer’s exposure to liability.

Since 2008, the provincial economy has stuttered and slowed. Some observers have described the present period as the "Great Recession", and even those with a slightly more positive outlook have noted the fragility of the economic recovery. In this climate, jobs have been lost and industries have become increasingly lean in a bid to survive. One outcome of the downturn has been the need for some employers to restructure their operations, and re-think compensation.

Historically, the Canadian judiciary has held that "neither adverse economic circumstances generally, nor the poor financial position of the employer, should affect the damages to which a wrongfully dismissed employee is entitled." (Farquhar v. Butler Brothers Supplies Ltd., 1988 CanLII 185 (BC CA)). It is also settled law that employees are not required to mitigate with an employer that constructively dismissed them, if they would be subjected to an "atmosphere of hostility, embarrassment or humiliation" (Evans v. Teamsters, Local 31, 2008 SCC 20 (CanLII)). This period of economic uncertainty, however, may be influencing the judiciary’s expectations of a mitigating employee, and its willingness to exercise discretion and find an atmosphere of this kind.

A trend may be emerging and what, during times of plenty, may have been flatly rejected could now amount to reasonable mitigation. Three recent cases highlight this:

1. In Jadubir v. Martinrea, 2012 ONSC 1367 (CanLII), the plaintiff, a Lead Hand Toolmaker of 15 years, was laid off by the defendant as part of a plant-wide lay-off. Due to economic pressures, the plaintiff was subsequently offered a return to work as a Toolmaker, at a $7 per hour decrease in pay. Other Lead Hand Toolmakers accepted the offer of continued employment in a lower position, and at a reduced rate of pay.

The plaintiff, however, rejected the defendant’s offer as he believed it would subject him to embarrassment and humiliation in the workplace. The trial judge ignored this assertion and concluded that, despite increasingly acrimonious relations between the parties, in refusing the modified job offer, he had failed in his duty to mitigate.

2. In Dahlgren v. Wainwright Harbour Hotel, 2011 ABPC 107 (CanLII), the plaintiff was constructively dismissed from her position as bar manager with the defendant, due to a significant downturn in revenue. The owner of the bar, who had previously not been involved in its day-to-day operations, took over this role and offered the plaintiff continued employment as a bar tender at a significantly reduced rate of pay.

The court determined that the plaintiff should have accepted the offer as part of her duty to mitigate, and that "many of the customers at the bar probably could not tell the difference between a bar manager and a bar tender." The court did not provide a reasoned basis for this assertion, but ultimately the plaintiff’s claim for damages was reduced as a result.

3. In Rowley v High Strength Plates Profiles Inc, 2011 ONSC 6221 (CanLII), again due to the economic downturn, the plaintiff was asked to accept a temporary reduction in pay. He did so. The defendant then changed this into a 12-month period of working notice of termination. Two months into this period, the plaintiff announced that he felt he had been constructively dismissed and was leaving his position.

The court found that the plaintiff failed in his duty to mitigate by refusing to continue working for the duration of his notice period and dismissed the action. Despite this, the court acknowledged that the defendant’s treatment of the plaintiff had damaged the working relationship, yet refused to find its actions amounted to the creation of a hostile, embarrassing or humiliating atmosphere.

These cases, while factually distinct, share a common thread. The plaintiff failed to mitigate by refusing to continue in employment for the defendant. Objective legal tests aside for a moment, it is easier in a courtroom, temporally and emotionally removed from the facts in dispute, to assert that a reduction in pay, a demotion or a change in title and authority are changes that should be accepted in the course of mitigation. The reality, however, is that for any one of us, perhaps especially those in the legal profession, this would prove a difficult pill to swallow.

Ultimately, employees should be aware, before they claim constructive dismissal and sue, that the court’s discretion, in this fragile economic time, may not be exercised as generously and as willingly as it might against the background of a robust economy, firing on all cylinders. What may in better times have been readily accepted as a humiliating, embarrassing or hostile atmosphere may no longer be. Mitigation is a critical step for all fired employees (with the Bowes v. Goss Power Products exception noted). [For a summary of that case and why that employee did not have a duty to mitigate see: Fixing the Duty to Mitigate on this blog.] Thus, any decision to turn down an offer of continued employment should be done so only after careful consideration.

Commentary by Sean Bawden

Reading Mr. Willets' post I was struck by a few thoughts. The first is that his comments apply equally to the situation of wrongful dismissal as they do to constructive dismissal. As this blog has explained before, in the post Explaining One's Duty to Mitigate, employees who find themselves suddenly unemployed have a legal obligation to secure new employment. This obligation applies regardless if one is actually or constructively dismissed.

The second comment is that while judges are no doubt alive the economic realities of the day, in my opinion where this acknowledgement is being reflected is more in the front end of cases - by finding that there has been no constructive dismissal at all. For example, this blog has looked at the cases of:

Where cases such as GM and Chartrand, not to mention Piresferreira v. Ayotte, 2010 ONCA 384 (CanLII), leave workers in Ontario is with the sense that, given the economic realities of the day, one is better to suffer through a position that he or she does not like than to claim constructive dismissal. Put another way, while one is always free to quit his or her job on account of the fact that the position has become unbearable, the same may no longer always translate into an award of damages for constructive dismissal. Certainly, on the holding of Piresferreira, an award of damages for constructive dismissal is about as much as one can hope in such a case, even if successful.

Whether this shift in attitudes is a reflection of the reality that jobs are becoming more difficult to come by and therefore employees should be expected to endure more hardships while in them,  I do not know. But, I suspect that the same is at least animating some judicial thinking.

Takeaways for Employees with Labour Pains

The takeaway for employees, I would suggest, is to always seek professional legal advice before taking the decision to claim constructive dismissal. While I in no way wish to leave readers with the impression that all hope is lost and that no claim for constructive dismissal will ever be successful in Ontario, as the cases highlighted above and by Mr. Willets demonstrate, the climate has changed and it is becoming more difficult to be successful.

If you are an Ontario worker and you believe that you have been constructively dismissed from employment, the professional, experienced, and cost-effective employment lawyers at Ottawa's Kelly Santini LLP would be happy to be of service to you.

Takeaways for Employers with Labour Pains

I do not wish to leave employers with the impression either that today's economic climate affords carte blance to do whatever one wishes to their employees. While not all cases of constructive dismissal will be successful, some will be. And, even in those cases where the court finds that no constructive has occurred,  defending a claim of constructive dismissal can still be costly;  in both terms of money and time.

If you are an employer in Ontario and are considering making changes to the workplace, or if one of your employees is claiming that he or she has been constructively dismissed, it is likely prudent to obtain professional legal advice from an experienced employment lawyer. The professional, experienced, and cost-effective employment lawyers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email or call 613.238.6321 x260. You may also use the contact box at the top of this page.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Sean Bawden, publisher of Labour Pains, can be reached by email at or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.

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