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When is a wrongfully dismissed employee required to accept on offer of re-employment to mitigate his or her damages against a former employer?

In the event of an unjust dismissal, both employees and employers have important roles to play: on the one hand, employees generally have an obligation to mitigate their damages by seeking an alternative source of income; on the other hand, employers have an obligation to compensate an unjustly dismissed employee for his or her losses due to lack of notice and/or severance.

These two roles can come to a head when a wrongfully dismissed employee is offered re-employment at the former workplace. Even though the offer adds up in dollars and cents, the employee may feel that the relationship with the former employer has broken down so much that it would not be healthy or appropriate to return. Conversely, the employer may allege that an employee is failing to mitigate his or her losses and other damages by not accepting such an offer. If so, the employer may assert that damages should be reduced accordingly.

The good news for employees is that Canadian courts have recognized that these intangible considerations – including the dignity of the work environment – carry significant weight in the mitigation analysis. In 2008, the Supreme Court of Canada held in Evans v. Teamsters Local Union No. 31 that an employee is not obliged to return to working in an atmosphere of hostility, embarrassment or humiliation.

Since then, recent appellate court decisions such as Morgan v. Vitran Express Canada Inc. (“Vitran”) and Fredrickson v. Newtech Dental Laboratory Inc. (“Newtech”) suggest that Canadian judges are not shying away from applying these important, if intangible, considerations.

In the 2015 decision of Vitran, the Ontario Court of Appeal held that a reasonable person in the employee’s position would not have accepted the offer of re-employment. Dunstan Morgan, a dock supervisor at Vitran, was demoted to a position of freight analyst. The trial judge held that the work environment was unfriendly: his relationship with his supervisors was acrimonious, and he would have suffered a loss of dignity in the eyes of his colleagues if he accepted the demotion. As a result, he was not required to do so as part of his duty to mitigate his damages.

The approach taken by the British Columbia Court of Appeal in the 2015 Newtech decision was similarly attentive to intangible workplace considerations. Ms. Fredrickson was a dental technician assistant at Newtech Dental Laboratory (“Newtech”). After eight-and-a-half years at the company, illness in her family caused Ms. Fredrickson to come under significant personal stress, and she requested a medical leave of absence. Following two-and-a-half months of leave, Ms. Fredrickson’s doctor advised her that she would be fit to return to work. However, when she reported for work, the company informed Ms. Fredrickson that she had been laid off.

In the months that followed, negotiations ensued and Ms. Fredrickson eventually issued a Statement of Claim alleging wrongful dismissal. Throughout this time, Newtech repeatedly offered to re-employ Ms. Fredrickson at her same position, salary, and benefits, and offered to pay varying amounts of lost wages. Ms. Fredrickson declined all of Newtech’s offers of re-employment. Meanwhile, she applied for nearly 100 jobs, carried out training for a different career path, and secured new employment the following year.

In asking whether Ms. Fredrickson’s refusal of the re-employment offer was reasonable, the court underscored the “the non-tangible but very real elements of the work place” and emphasized that “it is an infrequent case that requires an employee to accept re-employment”. In its decision, the court placed considerable weight on the principle of mutual trust and good faith between employee and employer, holding that the employer eroded Ms. Fredrickson’s trust by recording private conversations between them and in speaking with another employee regarding how embarrassed Ms. Fredrickson would be in returning to work.

As these cases demonstrate, unjustly dismissed employees presented with offers of re-employment do have options. In mitigating damages, employees should seek advice and should not feel obliged to return to an environment of hostility, embarrassment or humiliation.


This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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