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Mitigating damages in a time of uncertainty

The mitigation of damages has become a hot employment law issue. In this recent British Columbia case, the employee was entitled to damages for wrongful dismissal after the employer terminated her during the economic downturn. Although the employer argued that the employee failed to mitigate her damages when she did not accept the employer’s subsequent offer of re-employment, the Court found that the uncertainty of the offered work and payment was such that the employee did not act unreasonably when she declined the job offer. Thus, the employee was entitled to 12 months’ termination notice.

To be successful with its argument, the employer had to show that a reasonable person in the employee’s position would have accepted the employer’s offer.

When defending her reasons for not returning to the employer, the employee’s main argument was that the re-employment was too uncertain. Even though it appeared that the employer was offering the employee the same job with the same client at the same wages and working conditions, it was not really the same.

That is, the employee was not sure of the company’s long-term prospects of survival. The months prior to the termination were difficult and stressful, and half the staff had been laid off. Also, the employer was unable to meet payroll during the difficult period before the employee’s termination, it had left its office space mid-lease, and was locked out of shared space due to the landlord’s bankruptcy. The financial status of the company was not stable.

Though the employer had just secured a new contract that called for 15 to 18 months of work when the employee was re-offered the job, that client was known for not paying on time, and in the past had ended a contract before the completion date.

Therefore, the employee felt as though she was being offered a job where she may not get paid in a timely manner.

The Court found that there was a basis for the employee’s fear about the uncertainty of the flow of work and the ability of the employer to pay her for her work in the short term. The Court also considered the fact that the employee was in poor health due to post-surgical complications at the time.

Ultimately, the Court concluded that the employer could not prove that the employee acted unreasonably and failed to mitigate her losses when she refused the offer of re-employment.

What’s more, the employee did make serious attempts to find another position but was unsuccessful. One of our bloggers, Stuart Rudner, has written an in-depth commentary regarding the issue of mitigation of damages as it relates to employees’ efforts to search for alternative employment.

Therefore, the employee was entitled to notice for wrongful dismissal in the amount of 12 months’ notice.

Christina Catenacci
First Reference Human Resources and Compliance Editor

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Christina Catenacci

Christina Catenacci, BA, LLB, LLM, was called to the Ontario Bar in 2002 and has since been a member of the Ontario Bar Association. Christina worked as an editor with First Reference between February 2005 and August 2015, working on publications including The Human Resources Advisor (Ontario, Western and Atlantic editions), HRinfodesk discussing topics in Labour and Employment Law. Christina has decided to pursue a PhD at the University of Western Ontario beginning in the fall of 2015. Read more
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