Dismissed employee justified in refusing offer of reemployment with same employer

January 2016

Previously printed in the LexisNexis Labour Notes Newsletter

The B.C. Court of Appeal recently considered the extent of a dismissed employee’s obligation to accept re-employment with the same employer in order to satisfy the duty to mitigate damages flowing out of termination of employment.

Facts

In July 2011, Leah Ann Fredrickson was dismissed from her employment as a registered dental technician with Newtech Dental Laboratory (“Newtech”), a small business specializing in making crowns.

Fredrickson had worked for Newtech for 8.5 years at the time of her dismissal. The Newtech office was small; Fredrickson worked with the owner, Mr. Ferbey, and three other employees.

Fredrickson took a medical leave in April 2011 due to stress attributed to her husband and son being ill. Newtech determined she had not sought proper permission to take the leave and, when she returned to work on July 20, 2011, she was laid off for the reason of insufficient work. Newtech provided Fredrickson with a record of employment (ROE) which indicated she had been laid off. It also provided her with a letter of reference.

In September 2011, Fredrickson served Newtech with a demand letter. Newtech responded to Frederickson through its legal counsel and directed her to return to work on September 26, 2011. Newtech added that if she had been wrongfully dismissed, she was obligated to mitigate her damages by accepting the offer of reemployment.

Fredrickson commenced a wrongful dismissal action in October 2011. Allegedly before it knew about the commencement of the action, Newtech offered to re-employ Fredrickson. It also said it was prepared to pay her unpaid wages from July 20, 2011 until the date she was directed to return to work, i.e. September 26, 2011.

Fredrickson rejected Newtech’s offer of re-employment. She maintained that Mr. Ferbey’s behaviour since the time he purported to lay her off had broken the employment relationship. It was reasonable, Frederickson argued, for her to decline to return to work in Newtech’s small office.

B.C. Supreme Court

At trial, Newtech admitted it had dismissed Fredrickson without cause and the only issue was whether Fredrickson had mitigated her damages. The trial judge found no barriers existed to Fredrickson returning to work with Newtech, and consequently limited her damages to only the period from July through September 2011, when Newtech first offered her re-employment.

B.C. Court of Appeal

Fredrickson’s appeal from the trial decision was allowed.

The B.C. Court of Appeal (the “BCCA”) concluded that the trial judge had erred in two material respects.

First, the trial judge failed to accord significance to the incomplete nature of the offers; these were erroneously considered by the trial judge to be “make whole” offers. The BCCA found that accepting any of Newtech’s offers would not have placed Fredrickson in the same position as she would have been in had she not been wrongfully dismissed.

Second, the trial judge failed to properly capture the intangible element of mutual trust in the employment relationship. The BCCA noted:

The pertinent question when mitigation is in issue was described by Justice Bastarache as whether “a reasonable person in the employee’s position would have accepted the employer’s offer”. To determine whether this is so, in my view, requires a judge to consider the full nature of the employment relationship. This includes the obligations of good faith or fidelity on the part of both the employer and employee, consistent with the nature of the work and the workplace. Most frequently, questions of good faith, fidelity and fair dealing are questions that arise in the context of allegations of cause for the employee’s dismissal. The integrity of the employment relationship goes further, however. Just as trust of an employee, in the circumstances of the employment, is an important aspect for the employer, so too trust of the employer is important.

The BCCA noted that Fredrickson’s trust in her employer was eroded by at least two aspects of Mr. Ferbey’s actions; he had recorded private conversations he had with Fredrickson and also had discussed her with another employee. The BCCA attached importance to these “non-tangible” but “very real” factors, and said they were to be weighed in the analysis of whether it was reasonable for Frederickson to refuse to return to the workplace.

In the result, the BCCA found that Fredrickson did not fail to mitigate her damages as alleged by Newtech: the trust was eroded to the point where it was reasonable for Fredrickson to decline the offer of re-employment.

Take-Away

This is one of the latest decisions to consider Evans v. Teamsters Local Union No. 31, 2008 SCC 20, the case in which the Supreme Court of Canada affirmed that a wrongfully or constructively dismissed employee may have an obligation to mitigate damages by accepting re-employment with the same employer. Fredrickson v. Newtech Dental Laboratory Inc. is a decision which provides a clear example of when a dismissed employee will not be expected to accept such an offer of reemployment.

The fundamental question is clear. Would a reasonable person in the position of the employee have accepted the offer of re-employment with the same employer? This analysis requires a thorough review of the particular employment relationship under consideration.