In a recent decision, Dussault and Pugliese v. Imperial Oil Limited, 2018 ONSC 1168, the court addressed the issue of the need for a plaintiff to mitigate their damages on termination and whether an offer by the successor company of the employer defendant of re-employment constituted reasonable mitigation.
At the time of the termination, the plaintiff, Dussault, had been employed as the Manager of Real Estate Development for the defendant for a period of 39 years. The plaintiff was 63 years old at the time and earned $190,200.00 per year with entitlement to a significant benefits package. The second plaintiff, Pugliese, had been an employee of the defendant for a period of 36 years and was 57 years old at the time of her termination. Pugliese earned $156,700 per year and had an equally significant benefits package. Both plaintiffs were terminated without cause due to the defendant’s sale of its retail branch, Mac’s Convenience Stores Inc.
Over the course of a number of months during which time the defendant company Imperial Oil Limited was sold to Mac’s, there was a number of meetings between the plaintiffs, the defendant, and representatives from Mac’s. Eventually, the plaintiffs (and others) were advised that they would be made offers of employment from Mac’s for continued employment and that the defendant would be making a gratuitous lump sum payment to offset the period of 18 months which was the difference between the benefit plan offered by Mac’s and the benefit plan they had been receiving from the defendant. Employees were also advised that if they did not accept Mac’s employment offers, Imperial would meet its obligations under the employment standards legislation, but that their entitlement to severance pay would be substantially reduced or eliminated to reflect the fact that they “passed up an opportunity for continued employment with Mac’s”. The defendant refused to provide the value of the gratuitous lump sum payment to the plaintiffs.
Offers of Employment
Eventually, Mac’s and the defendant made formal offers of employment to the plaintiffs whereby their salaries were guaranteed for a period of only 18 months after which time they would be subject to review and adjustment to Mac’s standard salaries which were significantly lower than those earned while with the defendant. Additionally, the defendant refused to advise the plaintiffs of the lump sum payment that would be provided to them until after they had accepted the offer of employment from Mac’s.
Both plaintiffs refused the offers from Mac’s and were provided with their respective statutory entitlement under the Employment Standards Act, 2000 (Ontario). Both plaintiffs then chose to retire from Imperial Oil and received a pension, monthly RRSP bridge payments payable to age 65, health and dental benefits, life insurance and other benefits. At the time of the hearing, neither plaintiff had secured alternative employment.
The court relied on the Bardal factors and held that with regard to the plaintiffs’ length of employment, character of employment, age and availability of similar employment elsewhere, that each was entitled to 26 months’ pay in lieu of notice. The court held:
[51] Twenty-six months’ notice, in this case, represents a recognition that the plaintiffs’ circumstances are somewhat unusual having regard to the Bardal factors:
- The character of their employment: While neither Ms. Pugliese nor Mr. Dussault supervised other employees, they were both in positions with significant levels of responsibility. On its own this factor does not present unusual circumstances, but each of the other factors does.
- Their length of service: Mr. Dussault worked for Imperial for 39 years and Ms. Pugliese worked there for 36 years. In both cases, as in Canac Kitchens Ltd., supra, Imperial was their only employer since their respective graduations from university and college.
- Their ages: Mr. Dussault was 63 years old and Ms. Pugliese was 57 years old when their employment was terminated.
- The availability of similar employment in light of their experience training and qualifications: Imperial argues that the offers of employment from Mac’s is evidence of the availability of similar employment. However, in my view the Mac’s offers demonstrate the opposite view. Mac’s had only agreed to pay the plaintiffs’ base salaries at the same level as what they received from Imperial for 18 months. It is evident that Mac’s own pay scales for similar employment were significantly lower. This is reinforced by the fact that Ms. Pugliese and Mr. Dussault were told by Mac’s that they would have to keep their salary confidential so as to avoid conflict with other employees. If anything, the offers from Mac’s emphasize the difficulty the plaintiffs would have in finding similar employment. In addition, given that they had only worked for Imperial for their whole working lives, it is evident that their skills and experience were geared to one particular employer, likely making it difficult to transfer those skills to a different employer.
In response, the defendant argued that the notice period should be reduced because the plaintiffs had failed to mitigate their damages by accepting the Mac’s employment opportunity as offered to them. According to the court:
[55] Imperial has the burden of proving that Ms. Pugliese and Mr. Dussault failed to mitigate their damages. In Yiu v. Canada Kitchens Ltd., 2009 CanLII 9412 (ON SC), 2009 CanLII 9412 (Sup. Ct.), at para. 16, this Court emphasized that the employer’s burden is not a light one:
The onus an employer bears to demonstrate that the employee failed to mitigate is “by no means a light one…where a party already in breach of contract demands positive action from one who is often innocent of blame.” Accordingly, an employer must establish that the employee failed to attempt to take reasonable steps and that had his job search been active, he would have been expected to have secured not just a position, but a comparable position reasonably adapted to his abilities : Link v. Venture Steel Inc., 2008 CanLII 63189 (ON SC), 2008 CanLII 63189 (ON S.C.), paras. 45 and 46. An employer must show that the plaintiff’s conduct was unreasonable, not in one respect, but in all respects: Furuheim v. Bechtel Canada Ltd. (1990), 30 C.C.E.L. 146 (Ont. C.A.), para. 3.
[56] In making the argument that the plaintiffs failed to mitigate their damages by turning down the Mac’s offers, the defendant argues that the case is akin to situations in which courts have held that an employee was required to return to work with an employer during the notice period in order to mitigate his or her damages. In Evans v. Teamsters, Local 31, 2008 SCC 20 (CanLII), at para. 30, the Supreme Court of Canada recognized that there are circumstances in which employees may have an obligation to mitigate their damages by returning to work for a former employee:
Non-Tangible Work Conditions Should Be Considered
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, 1975 CanLII 15 (SCC), [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), 1989 CanLII 260 (ON CA), 70 O.R. (2d) 701). 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 CanLII 23 (SCC), [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.
However, in this case, the court held that the plaintiffs did not have an obligation to mitigate their damages by accepting the “strings attached” offers of employment from Mac’s. It was, according to the court, evident that the defendant and Mac’s negotiated terms in the agreement for the purchase and sale of the defendant’s retail business were meant to relieve the defendant from some of the financial consequences of potential claims by some of its affected employees while ensuring that Mac’s did not have to provide the same compensation to those employees in the long term. This may have been a good deal between the defendant and Mac’s, but the assessment of whether the plaintiffs had an obligation to accept the offer of employment from Mac’s is to take place from the perspective of a reasonable person in the plaintiffs’ position. The court found that the defendant, Imperial, had not discharged its burden of showing that the plaintiffs acted unreasonably by not accepting the offer of employment from Mac’s and maintained that the plaintiff had attempted to mitigate their damages and were unable to do so. The award of 26 months’ notice to each plaintiff remained unchanged.
This case is interesting in that it demonstrates to employers that not all offers of re-employment are sufficient to advance an argument that a plaintiff has failed to mitigate their damages on termination. It is clear from this decision that had the offer from Mac’s been for continued uninterrupted employment of the plaintiffs with the same or reasonably similar compensation and benefits, then it is likely that the plaintiffs would have been held to have failed in their mitigation efforts. However, by making the offers of re-employment conditional and with various contingencies and future decrease in remuneration, the offers were not consistent with the employment and remuneration that the plaintiffs had experienced at Imperial Oil – the offers were simply not putting the plaintiffs in an equal or sufficiently equal position to that they had previously and they were right not to accept the terms of the new offer.
Scott Chambers is an employment and human resources lawyer at Doak Shirreff Lawyers LLP.
Scott can be reached at [email protected] or 250-979-2527. You can also follow Scott on tTwitterat @DSEmploymentLaw and on Linkedin at www.linkedin.com/in/scottdchambers