Helping Former Employees Find New Work Can Minimize Employer Dismissal Liability
A recent Ontario decision demonstrates how employers can leverage employees’ duty to mitigate their damages following their dismissal, in order to minimize wrongful dismissal liability.
In Gannon v. Kinsdale Carriers [Gannon], the Ontario Superior Court of Justice (“ONSC”) dismissed an employee’s wrongful dismissal action because she turned down a new job that she was offered after her former employer recommended her to an industry contact. This is because the court found that the employee failed to mitigate her damages by refusing an offer of comparable employment, such that she was not entitled to pay in lieu of common law reasonable notice.
As discussed in greater detail below, Gannon illustrates why employers should generally assist former employees with finding new work following their dismissal.
Background
Ms. Gannon was employed by Kinsdale Carriers (“Kinsdale”) for over 22 years, until she was dismissed without cause in December 2020 due to the closure of Kinsdale’s trucking and transport business.
Ms. Gannon was initially hired for an accounts receivable and office administration position, but she also performed dispatch duties beginning in 2005 after one of Kinsdale’s dispatchers resigned. At the time of her dismissal, Ms. Gannon performed dispatcher and office administration/accounts receivable duties. Notably, Ms. Gannon had not signed a written employment agreement contracting out of her right to common law reasonable notice.
In December 2020, Kinsdale informed Ms. Gannon and its other employees that it would permanently close its business because it was no longer sustainable. Kinsdale provided Ms. Gannon with two weeks of notice that her employment would end on December 31, 2020, in accordance with the Canada Labour Code.
Kinsdale made every effort to assist Ms. Gannon with obtaining comparable employment as soon as possible, which included recommending Ms. Gannon to one of its industry contacts, Zehr Transport (“Zehr”). Moreover, Kinsdale insisted that Zehr offer Ms. Gannon a job with the same hourly wage, hours/schedule, and duties as her existing position. As a result, Zehr interviewed Ms. Gannon on December 29, 2020. During the interview, Zehr verbally offered Ms. Gannon a job with the same hours, duties, and remuneration as her existing role. However, Ms. Gannon declined the job offer the following day, on December 30, 2020.
Ms. Gannon subsequently commenced a wrongful dismissal action against Kinsdale, seeking 22 months of pay in lieu of common law reasonable notice. In response, Kinsdale argued that Ms. Gannon failed to mitigate her damages by refusing to accept Zehr’s offer of comparable employment. Conversely, Ms. Gannon argued that she took every reasonable step to mitigate her damages, including by completing an online course in bookkeeping.
The Court’s Decision
The court ultimately ruled that Ms. Gannon was not entitled to pay in lieu of reasonable notice because she failed to mitigate her damages by refusing Zehr’s offer of comparable employment.
In reaching this decision, the court held that employees have a duty to mitigate their damages by seeking comparable employment following their dismissal, which is defined as a job that is comparable in terms of status, hours, and remuneration. Moreover, the court held that the employer bears the onus of proving a failure to mitigate, which requires: (i) establishing that the employee failed to take reasonable steps to obtain comparable employment; and (ii) that the employee would have secured comparable employment if they had taken reasonable steps.
The court found that Ms. Gannon failed to mitigate her damages by refusing to accept Zehr’s job offer because it was a comparable job, given that she would have had the same duties, hours, and remuneration as her role with Kinsdale. Additionally, with respect to Ms. Gannon taking online classes instead of accepting the job with Zehr, the court held that employers cannot be held liable for a dismissed employee’s decision to change careers or pursue further training instead of seeking comparable employment.
In the result, the ONSC held that Kinsdale was not liable to provide Ms. Gannon with any pay in lieu of common law reasonable notice, and it dismissed Ms. Gannon’s wrongful dismissal action.
The Bottom Line
As Gannon illustrates, employers should assist former employees with finding new work following their dismissal in most cases, as this can greatly reduce or eliminate the employer’s potential liability for wrongful dismissal. This is because the employee will partially or fully mitigate their damages if they accept a new job during the reasonable notice period. Alternatively, an employee who refuses an offer of comparable employment will be found to have partially or fully failed to mitigate their damages, depending on when they were offered the comparable employment. The sooner an employee is offered comparable employment after their dismissal, the greater the reduction to the employer’s liability.
However, one important caveat is that offers of comparable employment are generally only relevant to the duty to mitigate where they are made after the employee’s dismissal (or where they at least remain open for acceptance after their dismissal). For example, in Dussault v. Imperial Oil Limited, the ONSC found that two employees did not fail to mitigate their damages by refusing offers of comparable employment because these offers were made prior to their dismissals becoming effective. In reaching this conclusion, the court held that an employee’s duty to mitigate is only triggered once their employment is terminated (not when they are provided with advance notice that their employment will be terminated in the future). Consequently, it is somewhat surprising that the ONSC found that Ms. Gannon failed to mitigate her damages by refusing Zehr’s job offer, given that she refused the offer one day prior to the termination of her employment. However, this is most likely because Ms. Gannon did not argue that her duty to mitigate had not been triggered yet, such that this argument was not before the court.
Accordingly, employers should ask industry contacts to offer comparable employment to employees after their dismissal takes place, in order for this strategy to be effective. Employers should also note that this strategy cannot be used to minimize liability when dismissing a fixed-term employee prior to the end of their contract because it is settled law in Ontario that fixed-term employees do not have a duty to mitigate their damages.
Finally, we recommend that once an employee has been dismissed, yet another important strategy to assist with mitigation (and put the Company in a better position to argue failure to mitigate if necessary), is to have the HR Department consistently send information on comparable job opportunities to the employee, whether found on such sites as LinkedIn, Monster, Indeed, ZipRecruiter, etc. Although such communication directly to the terminated employee becomes more difficult once they have secured counsel, it does not prevent the Company’s counsel from forwarding such information to the past employee’s lawyer. If comparable job opportunities are put to dismissed employees, it makes it that much more difficult for them to argue that they could not mitigate.
If you require any advice or assistance with reducing your workforce while minimizing liability, please do not hesitate to contact us for expert legal advice and guidance.
