Employee’s Damages Reduced for Failure to Mitigate by Accepting Re-employment

Previously printed in the CCH’s Focus on Canadian Employment and Equality Rights Newsletter.

Wrongfully dismissed employees generally have a duty to mitigate their damages by seeking and accepting comparable employment. In the right circumstances, that may also include a duty to accept re-employment with the very employer that dismissed them in the first place. In its recent decision, Hooge v. Gillwood Remanufacturing Inc., [2014] B.C.J. No. 16 (S.C.), the B.C. Supreme Court slashed an employee’s damages for wrongful dismissal from 18 months to 9 for exactly this reason.

Hooge was a millworker for Gillwood Remanufacturing Ltd. (“Gillwood”), which owned and operated a mill in Chilliwack. He was originally hired in 1975 and worked his way up the ranks to the position of production supervisor. Hooge maintained that position through a series of ownership changes until the defendant purported to “lay him off” indefinitely in August of 2011.

By way of a letter from his lawyer, Hooge denied that Gillwood had the right to lay him off and asserted that the lay-off constituted a fundamental breach of his employment contract. He sought damages for that breach and stated that absent a timely response to his demand, he would commence legal proceedings. Indeed, Hooge commenced an action seeking damages for wrongful dismissal on September 12, 2011. One week later, Gillwood stated that it was re-calling Hooge to work, effective immediately. Hooge declined to accept Gillwood’s offer to return to work.

Given that Hooge’s employment contract did not provide for a temporary lay-off and the fact that he clearly did not accept Gillwood’s attempt to lay him off, the Court agreed that the purported lay-off amounted to a wrongful termination. It further found that the reasonable notice period for Hooge was 18 months. The issue then became whether Hooge had failed to mitigate his loss by declining Gillwood’s offer of re-employment.

The obligation to mitigate by returning to a position offered by the same employer is governed by the considerations set out in Evans v. Teamsters Local Union No. 31, [2008] 1 S.C.R. 661. The test is essentially a reasonable person test: “whether a reasonable person in the employee’s position would have accepted the employer’s offer”. It requires a multi-factored and contextual analysis and the expected work environment during the period of continued employment is of significance. An employee is not obliged to continue to work in an atmosphere of hostility, embarrassment or humiliation.

Hooge alleged that it was reasonable for him to decline the offer to return to work for various reasons, including his sense that his employer was “out to get him” and that he was someone it wanted to “get rid of”. He reported feeling belittled and experiencing hostility and aggressiveness from the employer. He described personal and professional humiliation, which included the fact that he was laid off at a time when the mill was busier than it had been for years and a junior employee took over his position.

Despite Hooge’s testimony, the Court found that the lay-off decision was based on the financial viability of the company and designed to improve its productivity. The newest owner may have had a “different management style” but the evidence did not establish, on an objective basis, acrimony, mistreatment or similar actions or the undermining of Mr. Hooge’s authority in the workplace of such a nature that a reasonable person would refuse to mitigate his loss by returning to his former position. The Court reduced Hooge’s damages by the nine-month period that Gillwood likely would have had work for him.

In contrast, in Piron v. Dominion Masonry Ltd., 2012 BCSC 1070 (affirmed in 2013 BCCA 184), the B.C. Supreme Court found that an employee was justified in refusing to return to work for his employer based largely on a couple of “non-responsive and inappropriate” communications. What is the lesson for employers? The objective standard that the Court will apply is highly dependent on the facts.

Hooge also argued that he was entitled to refuse the re-employment offer because it was motivated solely by Gillwood’s realization that it faced a significant claim for damages for constructive dismissal. The court rejected this argument:

Even if the offer to re-employ was motivated by a desire to avoid the payment of damages in lieu of severance, that does not make it reasonable to decline the offer. It seems to me that an employer who has laid off an employee, or wrongfully terminated an employee without due notice, may very well come to the conclusion, particularly with the benefit of legal advice, that its actions constituted a wrongful dismissal and may seek to mitigate its own exposure to the payment of damages by offering to re-hire the employee.

Take-Away Point for Employers

When facing liability for wrongful or constructive dismissal, employers should consider offering re-employment to avoid being compelled to pay damages.

An employee will only be required to accept re-employment where it would be reasonable for him or her to do so and the workplace atmosphere is a major component of that highly fact-dependent analysis. Employer conduct before, during and after the termination is all considered in determining whether the employee would face a hostile or humiliating work environment.