Ontario employees who lose their job are required to take reasonable steps to replace their lost income. Severance is intended to bridge the gap while an individual is out of work, and there is a legal requirement that, where possible, a person take all reasonable steps to stem the flow of their losses. In the right circumstances, this requirement (referred to as the “duty to mitigate”) may even obligate a dismissed employee to accept re-employment with their former employer.
The Camus decision
A recent decision from the Ontario Superior Court of Justice, Quesnelle v. Camus Hydronics Ltd., considers when a dismissed employee may be required to accept re-employment at their former workplace to meet the duty to mitigate. The decision also offers useful guidance for employers about when the court will find an employment relationship has been fundamentally changed, thus allowing the affected individual to assert a constructive dismissal from employment.
In Camus, the plaintiff brought an action seeking damages for constructive dismissal. Prior to termination, he had earned an annual salary of $103,000. The defendant employer also provided the plaintiff with a vehicle and covered associated operating costs (even though the vehicle was used primarily for personal use).
In 2021, with over 409,000kms on the clock, the vehicle needed to be replaced. The employer, however, refused to assume this cost – thus effectively removing this aspect of the plaintiff’s compensation. In response, the employee sent an email stating in part, “because of the significant changes Cleaver-Brooks is proposing to my work, I feel I have no choice to set out my concerns. Bottom-line, I am being told to take a large pay cut and I cannot afford to do this.”
The employee estimated the cost of a replacement truck to be $55,000, plus $32,000 in annual operating costs (which included insurance, toll charges, fuel and maintenance). He subsequently resigned asserting that loss of the vehicle was a fundamental change to his employment, and thus a constructive dismissal.
Within a few days of asserting a constructive dismissal, and leaving the workplace, the employee listed and sold his home (with the sale being finalized two days after his resignation took effect). Having done so, the employee moved to Omemee, about 70 km from where he had been living in Oshawa (and about 90 minutes from his former workplace in Mississauga).
A month later, the defendant offered to give the plaintiff his job back for a year, with a fully paid vehicle. The plaintiff refused, as he had moved and his old job was now a 90-minute commute away.
Guidance from the court
When this case was heard, the defendant argued:
- the plaintiff’s loss a of a company-provided vehicle was not a fundamental change to the terms of his employment; and
- the plaintiff failed to mitigate both by moving to Omemee, where there were fewer jobs, and by refusing to accept its offer of re-employment with a fully paid vehicle.
In addressing these arguments, the court provided the following useful guidance for Ontario employers:
- Loss of vehicle was a fundamental change to the employee’s compensation: the court found that, excluding the cost of a new vehicle, this benefit had an annual value of approximately $30,000 (taking into consideration insurance, toll fees, fuel and maintenance). On the available evidence, this amount was equal to approximately 21% of the plaintiff’s total compensation. The court found a loss of this magnitude to be a “a significant reduction in the Plaintiff’s total remuneration, which also constitutes constructive dismissal.”
- Rejecting a return to work with a paid vehicle was not a failure to mitigate: the court found that the defendant’s offer “simply came too late in the game”. The plaintiff had already moved away from Oshawa when its offer was received. The court therefore concluded:
a. “But for the fact that Mr. Quesnelle had already moved, the offer of re-employment would have been accepted by a reasonable person in his circumstances;” and
b. “a reasonable person could consider the commute to be too long and too far. An additional 40 minutes per commute (80 minutes per day) when the commute is already around one hour each way, is one that a reasonable person could decline.”
- Moving to Omemee was a failure to mitigate: the court found that the plaintiff’s decision to move away from Oshawa (and the GTA) to a cottage in the Kawarthas was a failure to mitigate. In reaching this conclusion, the court found that:
a. while this was a personal decision that the plaintiff was free to make, the “employment consequences of that decision should not be visited on Camus;” and
b. a “reasonable person would not move away from the GTA”, if they intended to look for work in the HVAC field.
In finding that the plaintiff had failed to mitigate by moving away from the GTA, and continuing his job search in the Kawarthas, the court reduced the damages award by 30% (down to 7 months). This finding is a useful reminder that proving a failure to mitigate, in response to a constructive (or wrongful) dismissal claim, can be a worthwhile endeavour. In this case, it resulted in at least some cost savings for the employer.
Takeaways for employers
Camus helps clarify the circumstances in which a change in compensation will amount to a constructive dismissal. It also re-affirms that, in the right circumstances, an employee will be required to return to work to mitigate their dismissal. Finally, it put parameters around what may be reasonable for a person to accept in terms of a work commute, noting that an additional 40 minutes in this case was too much.
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