Terminated employees are frequently faced with the difficult task of assessing future employment opportunities. The assessment becomes even more complex in light of the employee's duty to act reasonably in mitigating their loss of employment.
As a result, it can be particularly difficult for employment lawyers to counsel terminated employees on whether to accept a less-than-ideal job offer, or whether to accept re-employment with a savvy employer’s job offer following constructive dismissal. The challenge for employment lawyers, as well as the courts, is to determine in which circumstances the employee must accept the alternate position in order to satisfy their duty to mitigate their loss of employment.
In Whiting v. First Data Canada Merchant Solutions ULC, [2011] B.C.J. No. 569, the British Columbia Court of Appeal provides guidance on the proper assessment of employees' mitigation decisions. Whiting worked as Director of Corporate Sales with First Data Canada Merchant Solutions ULC, a company that processed commercial credit and debit transactions using new "chip and PIN" technology. In that position, Whiting sold services to corporate clients. His work depended on an agreement between First Data and TD Bank, which provided First Data access to TD Bank's point-ofsale hardware needed to service these clients. Whiting's compensation package would be the envy of most salespeople. He was entitled to earn unlimited commissions in addition to a base salary of $102,140, as well as stock options.
On Nov. 6, 2009, TD Bank announced that it would terminate its agreement with First Data as of Dec. 1, 2009. Whiting would no longer have access to the necessary hardware to service corporate accounts and his position was now redundant.
On the same day, TD Bank offered Whiting a position as national sales manager. The position provided the same salary, and the opportunity to earn a maximum of 80 per cent of his base salary as incentive compensation determined on a group basis. The offer also included a bonus and participation in an employee share purchase plan.
Whiting refused the position. In his view, the TD Bank position provided a "restricted bonus scheme", decreased earning opportunity and a demotion in title. First Data then offered Whiting a position as director of corporate and mid-market sales, but with the compensation based on a mid-market sales model. Whiting turned down the offer, which First Data viewed as his resignation. Whiting commenced a wrongful dismissal action.
The trial judge found that Whiting had been terminated without cause when his job disappeared and that he did not have to accept First Data's offer of employment (with lesser terms) in order to comply with his duty to mitigate his loss. She did find, however, that Whiting's refusal of TD Bank's offer constituted a failure to mitigate his loss. In doing so, she compared Whiting's maximum potential earnings at the TD Bank with his four-year average prior earnings. She concluded that the compensation amounted to "substantially the same money."
The British Columbia Court of Appeal disagreed with the trial judge’s approach. Justice K. Smith determined that the trial judge's comparative assessment of the positions was "fundamentally flawed," and that other factual errors also existed. In doing so, the court focused on the comparative assessment, which remains at the core of the mitigation review. Maximum potential earnings and average past earnings were essentially apples and oranges, and not comparable. Justice Smith ordered a new hearing to determine whether the positions were, in fact, comparable.
In another recent decision, Chandran v. National Bank, [2011] O.J. No. 1895, the Ontario Superior Court of Justice found that the employer could not force an employee to accept a transfer to a position with different terms, and that the employee's refusal to accept the employment did not constitute a failure to mitigate.
In that case, National Bank grew concerned about Chandran’s supervisory skills following a survey of subordinates. As a result, National Bank issued a disciplinary letter and attempted to unilaterally transfer Chandran to one of two available positions, under different terms. Concerned that he could no longer trust his employer, Chandran refused the transfer and claimed constructive dismissal.
The court stated that National Bank did not have unlimited power to transfer Chandran. In light of the disciplinary letter and the fact that the positions offered were at a lesser salary grade, Chandran was not required to accept either position to mitigate his loss. Chandran had no positive duty to accept the transfer with his former employer.
The decisions reiterate that employment lawyers must engage in a comparative analysis, focusing on whether alternate employment includes comparable terms. The mitigation analysis continues to include an assessment of suitability, considering remuneration and status. The objective review of the workplace atmosphere, and whether it is hostile, embarrassing or humiliating, is merely one of the various factors that require attention in the assessment. The analysis remains a broad exercise.
Ultimately, it remains difficult for an employer to force a departing employee to accept a different position where such reemployment contains changes to the terms of employment and/or there exists a hostile work environment.
Craig Stehr practises labour and employment law at Nelligan O'Brien Payne LLP in Ottawa.
[This article is reprinted with permission and first appeared in the September 2011 issue of The Lawyers Weekly.]
