Evans v. Teamsters Local Union No. 31

Evans v. Teamsters Local Union No. 31
Collection
Supreme Court Judgments
Date
2008-05-01
Neutral citation
2008 SCC 20
Report
[2008] 1 SCR 661
Case number
31733
Judges
McLachlin, Beverley; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Abella, Rosalie Silberman; Rothstein, Marshall
On appeal from
Yukon
Subjects
Labour law
Notes
SCC Case Information: 31733
Decision Content
SUPREME COURT OF CANADA
Citation: Evans v. Teamsters Local Union No. 31,
[2008] 1 S.C.R. 661, 2008 SCC 20
Date: 20080501
Docket: 31733
Between:
Donald Norman Evans
Appellant
and
Teamsters Local Union No. 31
Respondent
Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Abella and Rothstein JJ.
Reasons for Judgment:
(paras. 1 to 51)
Dissenting Reasons:
(paras. 52 to 140)
Bastarache J. (McLachlin C.J. and Binnie, LeBel, Deschamps and Rothstein JJ. concurring)
Abella J.
______________________________
Evans v. Teamsters Local Union No. 31, [2008] 1 S.C.R. 661, 2008 SCC 20
Donald Norman Evans Appellant
v.
Teamsters Local Union No. 31 Respondent
Indexed as: Evans v. Teamsters Local Union No. 31
Neutral citation: 2008 SCC 20.
File No.: 31733.
2008: January 29; 2008: May 1.
Present: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Abella and Rothstein JJ.
on appeal from the court of appeal for the yukon territory
Employment law — Wrongful dismissal — Damages — Duty to mitigate — Union employee wrongfully dismissed after new union executive took office — Whether employee required to mitigate damages by returning to work for same employer.
E was employed for over 23 years as a business agent in the respondent union’s Whitehorse office. He was dismissed on January 2, 2003 after the election of a new union executive. The incoming president faxed E a termination letter, and later that same day telephoned him to “commence discussions”. E’s legal counsel wrote a letter to the incoming president the following day submitting that E was entitled to reasonable notice of the termination of his employment. He said that E was prepared to accept 24 months’ notice of termination and suggested that this could be granted through 12 months of continued employment followed by a payment of 12 months of salary in lieu of notice. Subsequent to this proposal there was a continuing exchange of correspondence between the lawyers, but no resolution was reached. In the meantime, the union continued to pay E his salary and benefits. E stated during this period that he wanted a settlement which would see him retire and his wife replace him as the union’s business agent. E also became aware that other union employees who had been fired on the same day and in the same way had been reinstated, either with working notice or unconditionally. On May 23, E received a letter from the union’s legal counsel requesting that he “return to his employment . . . to serve out the balance of his notice period of 24 months” and stating that, if he refused to return, the union would “treat that refusal as just cause, and formally terminate him without notice”. E indicated he would return to work provided the union immediately rescinded its termination letter of January 2003, but the union was not prepared to do so.
The trial judge found that E had been wrongfully dismissed and was entitled to 22 months’ notice. He also found that the union had not shown that E had failed to mitigate his damages. E was awarded over $100,000 in damages, representing the salary and allowances owed to him. The Court of Appeal set aside the damage award, holding that E had not acted reasonably with respect to the job offer made to him by the union, and that this constituted a failure to mitigate his damages.
Held (Abella J. dissenting): The appeal should be dismissed.
Per McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps and Rothstein JJ.: Where the employer has ended the employment contract without notice, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income. Given that both wrongful dismissal and constructive dismissal are characterized by employer‑imposed termination of the employment contract (without cause), there is no principled reason to distinguish between them when evaluating the need to mitigate. Although in some instances the relationship between the employee and the employer will be less damaged where constructive rather than wrongful dismissal has occurred, this will not always be the case. Accordingly, this relationship is best considered on a case‑by‑case basis when the reasonableness of the employee’s mitigation efforts is being evaluated. [27-28]
In some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer. Assuming there are no barriers to re‑employment, requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. Not imposing such a requirement would create an artificial distinction between an employer who terminates and offers re‑employment and one who gives notice of termination and offers working notice. [28‑29]
The employer bears the onus of demonstrating both that an employee has failed to make reasonable efforts to find work and that work could have been found. Where the employer offers the employee a chance to mitigate damages by returning to work for the employer, the central issue is whether a reasonable person would accept such an opportunity. A reasonable person should be expected to do so where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious. Other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and whether the offer of re‑employment was made while the employee was still working for the employer or only after he or she had already left. The critical element is that an employee not be obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation. Although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer, it is extremely important that the non‑tangible elements of the situation — including work atmosphere, stigma and loss of dignity — be included in the evaluation. [30]
Here, the evidence does not support the conclusion that E’s circumstances, viewed objectively, justified his refusal to resume employment with the union. E’s requests for rescission of the letter of termination and re‑establishment as an indefinite term employee were unreasonable since their effect would simply have been to extend his notice period to 29 months. The requirement that E’s wife be given a new contract of employment was also unreasonable, as this had no relationship to the conditions under which E himself would be continuing his employment relationship with the union. Moreover, the particular aspects of E’s testimony that were retained by the trial judge do not reflect an objective evaluation of the reasonableness of E’s decision to refuse employment in order to mitigate his damages. The trial judge erred in law in applying a purely subjective test and failing to consider relevant evidence. As the Court of Appeal recognized, there was strong evidence that E was prepared to resume his old job and that he understood the May 23 letter to be an invitation to do so. Furthermore, his concerns about returning to work were never invoked in the various negotiations with the union. Although the fears expressed by E may have been subjectively justified, there was no evidence of acrimony between the incoming president and E, and no evidence that E would be unable to perform his duties in the future. The fact that E was at one time prepared to return to work if his wife was guaranteed the same term also demonstrates that the reasons given by the trial judge to justify the refusal found no support in the evidence. The relationship between E and the union was not seriously damaged. Given that the terms of employment were the same, it was not objectively unreasonable for E to return to work to mitigate his damages. [37‑38] [47‑48] [50]
Per Abella J. (dissenting): When an employee is fired without cause and without reasonable notice, the dismissal is, at law, “wrongful”. The employee is immediately entitled to an action in damages. Such an employee should not be expected or required to mitigate any damages by remaining in the workplace from which he or she has been dismissed. To do so disregards the uniqueness of an employment contract as one of personal service. [106‑108]
A purely objective test should not be applied to E’s decision not to return to the workplace from which he had been fired. Both objective and subjective factors are relevant in evaluating what a reasonable person in the position of the employee would do and whether a particular dismissed employee should be obliged to mitigate any damages by working in an atmosphere of hostility, embarrassment or humiliation. Different employees will be differently affected by a dismissal, and are entitled to consideration being given to the reality of their own experience and reaction. [109] [113]
The trial judge rejected the union’s argument that the purpose of the January 2 phone call was to negotiate a period of working notice. There is no reason to disturb this finding. The trial judge also construed the union’s letter of May 23 as a demand that E return to work, not an offer. It is difficult to read it any other way, particularly since the letter said he would be dismissed for cause if he did not return on the specific date. The union could have told E on January 2 that his employment would end two years later, or that his employment would be terminated immediately with two years’ pay in lieu of notice. What it could not do was fire him without notice on January 2, and then, when negotiations failed, fire him unlawfully again when he failed to accept the union’s ex post facto acknowledgment that as of January 2, he was entitled to 24 months’ notice, but had to spend it working for the union. [117] [119‑121]
The trial judge’s findings on the reasonableness of E’s refusal to mitigate by returning to his former employer rested on nine factors, all of which were supported by the evidence. Likewise, there is no basis for overturning the trial judge’s factual finding that E acted reasonably in his negotiations with the union. There can be no significance attached to the fact that E did not, during the negotiations, expressly articulate the nine factors identified by the trial judge as justification for his refusal to return to work. Nor does the fact that E was prepared to return to work if his termination letter was rescinded constitute either an unreasonable expectation or an admission that his working relationships remained unaffected by the dismissal. [135‑136]
The burden was on the employer to demonstrate that E had failed to make reasonable efforts to find work. The trial judge concluded that E had made sufficient effort but that, given the size of the community, his age, and the unique nature of his job as a business agent among other things, no alternative jobs were available. The fact that the wrongful dismissal resulted in a paucity of alternative employment opportunities did not entitle the employer, in its own financial interests, to direct E to mitigate his damages by serving out the notice period in the workplace from which he had been wrongfully dismissed. [126] [137]
The trial judge’s reasons in this case reflect a thoughtful and thorough review of the evidence. He made no errors of law and his findings with respect to the reasonableness of E’s decision not to accede to the union’s demand that he mitigate his damages by returning to the workplace or face dismissal for cause, are amply supported in the evidence. Therefore, the trial judge’s decision should be restored. [116] [140]
Cases Cited
By Bastarache J.
Referred to: Cox v. Robertson (1999), 69 B.C.L.R. (3d) 65, 1999 BCCA 640; Michaud v. RBC Dominion Securities Inc., [2003] C.L.L.C. ¶ 210‑015, 2002 BCCA 630; Christianson v. North Hill News Inc. (1993), 106 D.L.R. (4th) 747; Farquhar v. Butler Brothers Supplies Ltd. (1988), 23 B.C.L.R. (2d) 89; Farber v. Royal Trust Co., [1997] 1 S.C.R. 846; Red Deer College v. Michaels, [1976] 2 S.C.R. 324; Mifsud v. MacMillan Bathurst Inc. (1989), 70 O.R. (2d) 701; Reibl v. Hughes, [1980] 2 S.C.R. 880; Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33.
By Abella J. (dissenting)
Cox v. Robertson (1999), 69 B.C.L.R. (3d) 65, 1999 BCCA 640; Farquhar v. Butler Brothers Supplies Ltd. (1988), 23 B.C.L.R. (2d) 89; Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986; Wells v. Newfoundland, [1999] 3 S.C.R. 199; Darbishire v. Warran, [1963] 1 W.L.R. 1067; Red Deer College v. Michaels, [1976] 2 S.C.R. 324; Cemco Electrical Manufacturing Co. v. Van Snellenberg, [1947] S.C.R. 121; Christianson v. North Hill News Inc. (1993), 106 D.L.R. (4th) 747; Smith v. Aker Kvaerner Canada Inc., [2005] B.C.J. No. 150 (QL), 2005 BCSC 117; De Francesco v. Barnum (1890), 45 Ch. D. 430; Reibl v. Hughes, [1980] 2 S.C.R. 880; Hollis v. Dow Corning Corp., [1995] 4 S.C.R. 634; Forshaw v. Aluminex Extrusions Ltd. (1989), 39 B.C.L.R. (2d) 140; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33; Stein v. The Ship “Kathy K”, [1976] 2 S.C.R. 802.
Authors Cited
Cheshire, G. C., C. H. S. Fifoot and M. P. Furmston. The Law of Contract, 8th ed. London: Butterworths, 1972.
England, Geoffrey. “Recent Developments in the Law of the Employment Contract: Continuing Tension Between the Rights Paradigm and the Efficiency Paradigm” (1994‑95), 20 Queen’s L.J. 557.
Fudge, Judy. “The Limits of Good Faith in the Contract of Employment: From Addis to Vorvis to Wallace and Back Again?” (2007), 32 Queen’s L.J. 529.
Harris, David. Wrongful Dismissal, vol. 2, loose‑leaf ed. Toronto: Thomson Carswell (updated 2005, release 8).
Waddams, S. M. The Law of Damages, loose‑leaf ed. Toronto: Canada Law Book (updated October 2004, release 13).
APPEAL from a judgment of the Yukon Court of Appeal (Saunders, Smith and Thackray JJ.A.) (2006), 231 B.C.A.C. 19, 381 W.A.C. 19, 53 C.C.E.L. (3d) 177, [2006] C.L.L.C. ¶ 210‑045, [2006] Y.J. No. 90 (QL), 2006 CarswellYukon 86, 2006 YKCA 14, reversing a decision of Gower J., [2005] Y.J. No. 106 (QL), 2005 YKSC 71. Appeal dismissed, Abella J. dissenting.
Eugene Meehan, Q.C., and Marie‑France Major, for the appellant.
Leo B. McGrady, Q.C., and Christopher J. Foy, for the respondent.
The judgment of McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps and Rothstein JJ. was delivered by
[1] Bastarache J. — This appeal concerns an employee’s duty to mitigate damages for wrongful dismissal. In particular, the Court is asked to determine whether an employee who has been wrongfully dismissed is required to mitigate damages by returning to work for the same employer who terminated the employment contract.
Facts
[2] The appellant, Donald Evans, was employed for over 23 years as a business agent in the respondent union’s Whitehorse office. He was one of two employees in this office; the other was his wife, Ms. Barbara Evans. Mr. Evans was dismissed on January 2, 2003 after the election of a new union executive. During the election campaign, held in December 2002, Mr. Evans supported the incumbent president, who was defeated.
[3] Prior to taking office on January 1, 2003, the incoming president, Mr. Hennessy, asked the union’s legal counsel, Mr. McGrady, for an opinion regarding the termination of six employees, including Mr. Evans and three other business agents located in other cities. In a letter dated December 31, 2002, counsel suggested that a court would find that Mr. Evans was an “indefinite term employee” and that the union’s severance pay plan was “not a substitute for the Local’s obligation to provide working notice or pay in lieu of notice”. He also suggested the wording of a letter to be sent to the four business agents.
[4] On January 2, 2003, Mr. Hennessy faxed a letter to Mr. Evans. This letter was almost entirely in the form suggested by counsel, but did not include the clause regarding working notice. The letter could not have come as a surprise to Mr. Evans because earlier that day he had received a copy of Mr. McGrady’s opinion letter, “leaked” by somebody at the union’s main office in Delta.
[5] As promised in his letter, Mr. Hennessy telephoned Mr. Evans later that same day to “commence . . . discussions”. This conversation was surreptitiously tape recorded by Mr. Evans.
[6] Mr. Evans’ legal counsel, Mr. Macdonald, wrote a letter to Mr. Hennessy on January 3, 2003. He submitted that Mr. Evans was entitled to reasonable notice of the termination of his employment. He said that Mr. Evans was prepared to accept 24 months’ notice of termination and suggested that this could be granted through 12 months of continued employment followed by a payment of 12 months of salary in lieu of notice.
[7] Subsequent to this proposal there was a continuing exchange of correspondence between the lawyers, but no resolution was reached. Mr. McGrady insisted that the original letter of January 2, 2003 “was not intended as a termination without notice”, while Mr. Macdonald questioned that position, but pushed for negotiations. In the meantime, the union continued to pay Mr. Evans his salary and benefits, a fact which added a wrinkle to the ongoing discussions. Further, Mr. Evans stated during this period that he wanted a settlement which would see him retire and his wife replace him as the union’s business agent.
[8] Mr. McGrady stated the following in a letter dated May 23, 2003:
I am replying to your letter of May 12, 2003. My client is unable to agree to Ms. Evans’ demands, for reasons that are too extensive to enumerate. There appears to be no basis for further negotiations.
On behalf of the Local, we request that Mr. Evans return to his employment no later than June 1, 2003, to serve out the balance of his notice period of 24 months. To be clear, the total notice period is the 24 months from January 1, 2003 until and including December 31, 2004.
If Mr. Evans refuses to return no later than June 1, 2003, my client will treat that refusal as just cause, and formally terminate him without notice.
We will also amend the Statement of [Defence] adding a claim, amongst others, that he has failed to mitigate his loss by rejecting this return to work.
[9] Mr. Macdonald, in a letter also dated May 23, 2003, asked to be provided with documentation “evidencing that Mr. Evans was ever given 24 months notice of termination of his employment”. Mr. Macdonald wrote a second letter to Mr. McGrady on the same date in which he said:
At this time, we consider the employer’s position outlined in your May 23, 2003 letter to be an attempt to accept the settlement proposal that was conveyed to Mr. Hennessy by our letter dated January 3, 2003. You will recall that in that letter we indicated that Mr. Evans was prepared to accept 24 months notice of termination of employment as an alternative to litigation.
If Mr. Evans is now to consider accepting the employer’s offer to mitigate his damages by continuing his employment for a period of 24 months commencing January 1, 2003, one issue that must also be resolved is the continued status of Ms. Evans.
[10] Mr. McGrady replied on May 27, 2003 that the union had “no plans to suspend, discipline or lay off Ms. Evans”, but that it was not prepared to negotiate any special arrangements with her. It thus appeared to Mr. McGrady that “there is no further point in negotiating with respect to Ms. Evans, or Mr. Evans”. In a second letter of the same date, Mr. McGrady informed Mr. Macdonald that the union was requesting that Mr. Evans return to work on June 1, 2003 and that in doing so he would “be working through the 24-month notice period from January 1, 2003 through to December 31, 2004”.
[11] Mr. Macdonald responded on May 30, 2003, stating that Mr. Evans would return to work provided the union “immediately rescinds and withdraws” its termination letter of January 2, 2003. Mr. McGrady replied that the union was not prepared to withdraw its notice of termination. Mr. Macdonald then declared that Mr. Evans had never “received 24 months notice of the termination of his employment”, and therefore “he cannot rationally be expected to respond positively to your client’s directive to return to work”.
[12] The exchange of correspondence ended with a letter from Mr. McGrady to Mr. Macdonald dated June 2, 2003 in which he stated that the union would be pleading that Mr. Evans had failed to mitigate his loss by declining to return to work.
Judicial History
Yukon Territory Supreme Court, [2005] Y.J. No. 106 (QL), 2005 YKSC 71
[13] Gower J. found that the termination letter of January 2, 2003 had the effect of repudiating the employment contract and putting it to an end. He also found that Mr. Evans was an indefinite term employee and that the union was obliged to provide him with reasonable notice or pay in lieu of notice.
[14] With respect to the telephone conversation between Mr. Hennessy and Mr. Evans on January 2, 2003, Gower J. found that Mr. Hennessy was attempting to negotiate a renewal of Mr. Evans’ employment for a fixed term. He concluded that what the union had done was terminate Mr. Evans with the letter and then attempt to rehire him for an additional term with the phone call. However, the negotiations to enter into the new contract of employment ultimately failed. Thus, the union’s termination of Mr. Evans’ employment on January 2, 2003 was without cause and without reasonable notice and therefore constituted a wrongful dismissal.
[15] Gower J. found that the appropriate period of notice for Mr. Evans was 22 months. He was, however, unable to conclude that the union had acted in bad faith in the manner of its termination and, as a result of this finding, declined to extend the required notice period to account for the nature of the dismissal.
[16] Regarding whether Mr. Evans had failed to mitigate his damages, Gower J. stated the following (at para. 67):
. . . I was not particularly impressed by the efforts of Mr. Evans to obtain alternate employment. However, I am also not satisfied that the Union has met the “relatively high standard of proof” that not only did Mr. Evans fail to make reasonable efforts to find work, but that had he done so, he likely would have found comparable alternative employment in the Yukon. I agree that he put minimal effort into the task, but there is little or no evidence that it would have made a difference if he had done more.
[17] Gower J. also noted, with respect to Mr. Evans’ failure to return to work with the union on June 2, 2003, that Mr. Evans had been prepared to resume his employment, providing the union rescinded the termination letter and he was able to return to his previous status as an indefinite term employee, as was the case with Mr. Owens (another of the terminated business agents). In the view of Gower J., these were not unreasonable expectations, nor was Mr. Evans’ decision not to return to work when the union refused to meet the requests. He further found that although the union had argued extensively that there was ample evidence showing that Mr. Evans had nothing to fear from a continued relationship with Mr. Hennessy and the new executive, there were in fact a number of factors supporting the reasonableness of Mr. Evans’ apprehensions.
[18] In his discussion of the mitigation issue, Gower J. acknowledged a number of cases that the union said indicated that a dismissed employee may have a duty to mitigate by returning to the same employer who dismissed him or her, even where a wrongful dismissal action has been commenced. He pointed out, however, that most of those cases were constructive dismissal situations and that they were therefore distinguishable for that reason alone. Further, in Cox v. Robertson (1999), 69 B.C.L.R. (3d) 65, 1999 BCCA 640, one of the few cases on this point that did not involve a constructive dismissal, it had been held that the duty to accept employment “will arise infrequently” (para. 11). Finally, Michaud v. RBC Dominion Securities Inc., [2003] C.L.L.C. ¶ 210-015, 2002 BCCA 630, was also distinguishable since Mr. Evans believed the working relationship had been poisoned by the circumstances surrounding his termination, while in Michaud the relationship between employee and employer remained amicable. Gower J. stated that while some of Mr. Evans’ fears about his relationship with the union may have been overstated in this case, they were not without foundation and were therefore not unreasonable. He concluded as follows (at para. 93):
Reading all of these cases together, it appears that it is truly the rare case when wrongfully dismissed employees will be considered in breach of their duty to mitigate their damages by failing to return to the employment from which they had been dismissed. I find that, in all of the circumstances, Mr. Evans did not breach his duty to mitigate by failing to return to the Union’s employment after he was terminated.
[19] Gower J. ultimately found that the union had not satisfied the relatively high standard of proof required to show that Mr. Evans had failed to mitigate his damages.
Yukon Court of Appeal (2006), 231 B.C.A.C. 19, 2006 YKCA 14
[20] Thackray J.A., writing for a unanimous court, noted that the trial judge had found that Mr. Evans was not qualified for other jobs in Whitehorse and had not even attempted to seek alternate employment. In his view, these factual determinations were highly relevant to the legal question of whether Mr. Evans had a legal duty to mitigate his damages by accepting re-employment with the union. Thackray J.A. stated the following (at paras. 38-39):
When all of the evidence is considered, it is clear that there was a job open for Mr. Evans and that he would be paid for two years from 1 January 2003. It is equally clear that this was known to Mr. Evans. The job was available to Mr. Evans on essentially the same terms that he had held it before. Thus, the trial judge overlooked important relevant evidence and, as a result, reached an erroneous conclusion on this question that is “plainly seen”: see Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; . . . at paras. 6, 10.
The key difference, of course, was that he would be working in a politically charged environment under the ticking clock of a two-year notice period. This raises the second part of the equation: namely, was it reasonable of Mr. Evans, in these circumstances, to refuse the job?
[21] Thackray J.A. agreed with the union’s position that “there was a bona fide opportunity for Mr. Evans to accept the position of business agent on June 2, 2003 in order to mitigate his damages” (para. 41). He held that while the trial judge was correct in finding that Mr. Evans was prepared to return to work if the union rescinded the termination letter, this condition was, on the evidence, an unreasonable expectation.
[22] He also referenced the cases the union had relied on to show that a former employee may have a duty to mitigate by returning to work for the same employer, even where a wrongful dismissal action has been commenced. The trial judge had said that most of those cases were constructive dismissal situations and were therefore distinguishable for that reason alone. Thackray J.A. rejected this conclusion, stating (at para. 52):
I cannot find any support in the case law for the proposition that constructive dismissal cases are distinguishable from express dismissal cases per se. While it is a distinguishing factor, the principles are the same in both types of dismissal. Nor do I find support for the proposition that it will only be the “rare” case where a terminated employee is not obliged to return to his former employer in order to mitigate his damages. Where the facts of the case, viewed objectively, warrant it, mitigation requires just that.
[23] Ultimately, Thackray J.A. held that the evidence did not support the conclusion that Mr. Evans’ circumstances, viewed objectively, justified his refusal to resume employment with the union. He noted that the fact that Mr. Evans was prepared to resume his old job was never in doubt and it had never been contended otherwise. Mr. Evans had failed to act reasonably with respect to the job offer made to him by the union, and this constituted a failure to mitigate his damages.
Analysis
[24] On appeal to this Court, the appellant argues that cases requiring that an employee mitigate damages by returning to the same employer deal primarily with individuals who have been constructively dismissed. He says that the trial judge was correct in finding that those cases must be distinguished from others in which the employee has been wrongfully dismissed. In support of this position, the appellant cites a judgment by the Alberta Court of Appeal in which it was held that in wrongful dismissal cases “the plaintiff need not mitigate damages by . . . going back to the employer who fired him or her” (Christianson v. North Hill News Inc. (1993), 106 D.L.R. (4th) 747, at p. 750). The British Columbia Court of Appeal appeared to make a similar finding in Farquhar v. Butler Brothers Supplies Ltd. (1988), 23 B.C.L.R. (2d) 89, at p. 93, stating that although a constructively dismissed employee may at times be required to mitigate by returning to the same employer, there is “normally no question” that an employee will be required to do so where there has been a wrongful dismissal.
[25] Ten years after Farquhar, however, the British Columbia Court of Appeal accepted that even a wrongfully dismissed employee could be required to mitigate by accepting re-employment with his or her former employer on a temporary basis. While the court in Cox held that on the facts before it a dismissed dental assistant did not need to return to work for the same dentist, its decision clearly contemplated that such mitigation may in some circumstances be required of wrongfully dismissed employees. In that case, the court applied the same principles it articulated in Farquhar, notwithstanding the fact that the earlier case dealt with a constructive dismissal while the facts before it concerned a wrongful dismissal.
[26] In my view, the British Columbia Court of Appeal was correct to apply the same principles to both constructively dismissed and wrongfully dismissed employees. The key element is that in both situations the employer has ended the employment contract without notice. Indeed the very purpose behind recognizing constructive dismissal is to acknowledge that where an employer unilaterally imposes substantive changes to an employment contract, the employee has the right to treat the imposition of those changes as termination. This termination is every bit as “real” as if the employee were actually told of the dismissal and is, accordingly, accompanied by the same right to claim for damages in lieu of notice:
Where an employer decides unilaterally to make substantial changes to the essential terms of an employee’s contract of employment and the employee does not agree to the changes and leaves his or her job, the employee has not resigned, but has been dismissed. Since the employer has not formally dismissed the employee, this is referred to as “constructive dismissal”. By unilaterally seeking to make substantial changes to the essential terms of the employment contract, the employer is ceasing to meet its obligations and is therefore terminating the contract. The employee can then treat the contract as resiliated for breach and can leave. In such circumstances, the employee is entitled to compensation in lieu of notice and, where appropriate, damages.
(Farber v. Royal Trust Co., [1997] 1 S.C.R. 846, at para. 24)
[27] Given that both wrongful dismissal and constructive dismissal are characterized by employer-imposed termination of the employment contract (without cause), there is no principled reason to distinguish between them when evaluating the need to mitigate. Although it may be true that in some instances the relationship between the employee and the employer will be less damaged where constructive rather than wrongful dismissal has occurred, it is impossible to say with certainty that this will always be the case. Accordingly, this relationship is best considered on a case-by-case basis when the reasonableness of the employee’s mitigation efforts is being evaluated, and not as a basis for creating a different approach for each type of dismissal.
[28] In my view, the courts have correctly determined that in some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer. Assuming there are no barriers to re-employment (potential barriers to be discussed below), requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.
[29] There appears to be very little practical difference between informing an employee that his or her contract will be terminated in 12 months’ time (i.e. giving 12 months of working notice) and terminating the contract immediately but offering the employee a new employment opportunity for a period of up to 12 months. In both situations, it is expected that the employee will be aware that the employment relationship is finite, and that he or she will be seeking alternate work during the 12-month period. It can also be expected that in both situations the employee will find that continuing to work may be difficult. Nonetheless, it is an accepted principle of employment law that employers are entitled (indeed encouraged) to give employees working notice and that, absent bad faith or other extenuating circumstances, they are not required to financially compensate an employee simply because they have terminated the employment contract. It is likewise appropriate to assume that in the absence of conditions rendering the return to work unreasonable, on an objective basis, an employee can be expected to mitigate damages by returning to work for the dismissing employer. Finding otherwise would create an artificial distinction between an employer who terminates and offers re-employment and one who gives notice of termination and offers working notice. In either case, the employee has an opportunity to continue working for the employer while he or she arranges other employment, and I believe it nonsensical to say that when this ongoing relationship is termed “working notice” it is acceptable but when it is termed “mitigation” it is not.
[30] I do not mean to suggest with the above analysis that an employee should always be required to return to work for the dismissing employer and my qualification that this should only occur where there are no barriers to re-employment is significant. This Court has held that the employer bears the onus of demonstrating both that an employee has failed to make reasonable efforts to find work and that work could have been found (Red Deer College v. Michaels, [1976] 2 S.C.R. 324). Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity. In 1989, the Ontario Court of Appeal held that a reasonable person should be expected to do so “[w]here the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious” (Mifsud v. MacMillan Bathurst Inc. (1989), 70 O.R. (2d) 701, at p. 710). In Cox, the British Columbia Court of Appeal held that other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and whether the offer of re-employment was made while the employee was still working for the employer or only after he or she had already left (paras. 12-18). In my view, the foregoing elements all underline the importance of a multi-factored and contextual analysis. The critical element is that an employee “not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation” (Farquhar, at p. 94), and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer (Reibl v. Hughes, [1980] 2 S.C.R. 880), it is extremely important that the non-tangible elements of the situation — including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements — be included in the evaluation.
[31] I note that the nature of this inquiry increases the likelihood that individuals who are dismissed as a result of a change to their position (motivated, for example, by legitimate business needs rather than by concerns about performance) will be required to mitigate by returning to the same employer more often than those employees who are terminated for some other reason. This is not, however, because these individuals have been constructively dismissed rather than wrongfully dismissed, but rather because the circumstances surrounding the termination of their contract may be far less personal than when dismissal relates more directly to the individuals themselves. This point is illustrated by Michaud in which a bank executive was constructively dismissed as a result of an organizational restructuring. The evidence showed that the bank offered the employee another executive position and was anxious to have him continue working for them. Importantly, there was no evidence that the relationship between the employee and the bank was acrimonious or that he would suffer any humiliation or loss of dignity by returning to work while he looked for new employment. As a result, mitigation was required.
[32] I also note parenthetically that I do not believe that damages awarded by lengthening the notice period because of bad faith conduct in the manner of dismissal (Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701) should ever be subject to mitigation. These damages, though expressed in terms of an extension to the “notice period”, are in fact awarded as a result of the manner in which the employee is terminated and not in recognition of the fact that he or she is entitled to an opportunity to arrange his or her affairs prior to losing all employment income. As a result, the employee’s ability to replace the lost income through mitigation is irrelevant, as this does not alter the suffering