Redefining Constructive Dismissal, Chapter Two - Mitigation

Recently, we surveyed some of the problems in the analysis of employee condonation of employer breaches of contract.

Next, let's talk about mitigation - about the expectation that constructively dismissed employees will stay in their jobs, because the 'reasonable person' wouldn't just dump a perfectly good job without a fallback plan.

Let's start with mitigation generally. The concept isn't unique to employment law, but is an extension of the general law of damages: Innocent parties are entitled to damages to put them into the position they would have occupied but for the breach, but they cannot recover for avoidable or avoided losses.

If you agree to buy 100,000 widgets from me at $10 each, and then you renege...I can't just dump the widgets in the garbage and sue you for a cool million; I have to still try to sell the widgets at the best price I can get for them, and sue you for any shortfall.  So if I can only get $8.50 per widget from others, I sue you for $150k.

In employment law, in practice, it means that, after a wrongful dismissal (i.e. you dismissed me without adequate notice), I can't just sit on the couch watching soap operas for the notice period; I have to try to find new work to reduce my loss.

But the expectations on the plaintiff aren't high, either in the doctrine of mitigation generally or within the wrongful dismissal domain: The courts recognize that the employer is looking to the employee to reduce the employer's own liability for the employer's breach.  The employee isn't held to a standard of perfection, and isn't necessarily expected to take the first job that comes along, but is entitled to look for something reasonably suited to the specific circumstances.

Generally, this means that the employee is entitled to hold out for a job at a similar level to his old job, on a similar scale of compensation, that is suited to the employee's skills and experience. Even in a tough economy, where one's instinct might be to say that a "reasonable person" would lower their expectations and take whatever job they can find, the case law generally holds that the breaching employer is not entitled to expect the plaintiff to do so.

Proving failure to mitigate, in other words, is a heavy burden upon the employer.

Except in constructive dismissal matters and other similar cases.

Employment with the Same Employer

There are a range of cases dealing with employers who constructively dismissed employees, or who actually dismissed them and then offered them their jobs back. For all intents and purposes, these cases are analytically indistinguishable.

While the doctrine didn't start here, the best place to start the examination is Evans v. Teamsters: The Employer sent Evans a termination letter, then they started negotiations as to how to resolve their outstanding issues.  Evans made a number of demands, which the employer found unacceptable, but the employer offered to bring him back to work through a 24-month working notice period.  Evans refused, and was found to have acted unreasonably in doing so.

The Supreme Court of Canada ruled that an employee ought to take such an offer so long as there are "no barriers" to re-employment, in the sense that the employee ought not to have to work in an environment of hostility, embarrassment, or humiliation.

In practice, this amounts to a very different standard than the one usually applied to mitigation. Rather than a high burden upon the employer to show that the employee acted 'unreasonably' in turning down an offer of replacement employment, the result of this is that, so long as the court is satisfied that the work environment did not entail hostility, embarrassment, or humiliation, the expectation is that the employee will return.

While the onus still technically remains on the employer, this is not a high onus, and even in cases where the court seems to accept that the employee honestly perceived hostility, embarrassment, or humiliation, it can still be a failure to mitigate to refuse to return.  (See, for instance, Chevalier v. Active Tire.)

This has some odd results. Firstly, it renders a substantial range of employee rights completely moot and devoid of remedy: A unilateral and fundamental change to an employee's duties, working conditions, or job classifications - so long as it does not touch on compensation, or create an atmosphere of hostility, embarrassment, or humiliation - is essentially not an actionable breach, because, even though the employer is repudiating the employment contract, the employee is unable to accept that repudiation without being regarded as having failed to mitigate.  This gives the employer an effective right to impose new terms unilaterally and without notice.

I'm not familiar with commercial contract repudiation cases being resolved in this manner. If anybody knows of cases outside the employment context where a plaintiff, upon accepting the defendant's repudiation, has been required to accept the changed terms proposed by the defendant in mitigation, I'd like to see it.

Secondly, it creates a scenario where faultlessness on the part of the employee militates against a remedy for that employee.  Which is weird.  For example, an employee whose duties are pulled away because of ineptitude or misconduct will have an easier time establishing that the resulting environment is one of hostility, embarrassment, or humiliation, than one whose duties are pulled away as part of an employer-initiated restructure.

Fool Me Once, Shame On You

The majority of the Court in Evans simply didn't see that big of a difference between an employer giving working notice of termination, versus an employer terminating without notice and then offering to employ the person to the end of the notice period.

There are significant practical and theoretical differences, however.

We're Only Employing You Because We Don't Want To Pay You Out

If, in an Evans-type case, the termination letter AND the mitigation offer came at the same time, one might understand the court's reticence to see this as meaningfully different from working notice.

In cases like Evans and Chevalier, where the offer to return the employee to their duties came on the heels of a demand for substantial wrongful dismissal damages, the obvious subtext is that the offer is just for the purpose of minimizing liability.

The mere fact of termination (as in Evans) or temporary layoff (as in Chevalier) clearly communicates that the employer does not see business value in continuing to have that employee in the workplace. They want the employee gone. A re-offer after an employee demand for compensation, barring something truly extraordinary, is unlikely to signify a change in that assessment: "We still want you gone, but if we're going to have to pay you anyways..."

It's difficult to see how this messaging can not create an environment of hostility, embarrassment, or humiliation, when employees are being asked to return to a workplace after being told that they're not valued or wanted.

Not Just In The Course Of Business

In my first week of law school, when being introduced to different modes of damage calculation and efficient breach (via the Peevyhouse case, with which, to be fair, I have significant disputes), one of my classmates protested at length that it seemed unfair because "a deal is a deal!"

Sophisticated commercial actors know to look beyond the text of the contract to understand that breach is a possibility on either side. They negotiate the contract at the front end with that in mind. If, at any point, it makes commercial sense to breach the contract, they'll do so, and they know that the other party will do the same. And to the extent that you might have to incur legal fees to argue about contract damage entitlements, that's just part of the cost of doing business.  This all holds pretty reliably in the world of multi-million dollar transactions.

But for individuals who aren't running businesses (and also people running small businesses), legal fees - outside of wills and real estate transactions - aren't just the 'cost of doing business'. Lawyers are a significant and often disproportionate expense, considering the nature of the transactions most individuals are usually involved in. When you get your car serviced, you're not asking the mechanic about his insurance and pecuniousity in case something goes wrong; you're looking for a track record of reliability and good customer service, to be confident that nothing will go wrong...or that if it does, they'll make it right without needing to pay thousands to a lawyer first.

With transactions in the six digits or lower, trust that the other person will perform becomes an important part of the deal, because litigation is just going to destroy whatever budget you have for the transaction.  On most transactions, if we don't trust the other side to hold up their end of the deal, we're not entering the deal, period.

For most employees, the expectation is that A Deal is a Deal, and if the employer illustrates that it does not feel bound to honouring a deal with that employee, that will understandably create reticence on the part of the employee to deal further with the employer.

Nor is this grassroots rejection of efficient breach one-sided, in the employment relationship.  When employees resign without notice, it seldom causes quantifiable recoverable damages for the employer...but whatever damages the employer may or may not be able to pursue, it typically DOES leave hard feelings.  Having left without notice is a black mark for future employability, such that other employers will be reluctant to hire an employee who has done so. Again, this isn't an analysis of the employee's ability to satisfy a judgment for damages in the event the employee breaches his obligation to provide notice; the new employer simply doesn't want to face that scenario in the first place.

The Double-Standard of Working Relationships Between Adversarial Litigants

But there's an asymmetry in how 'legal action' is treated in the case law:  Employees are often expected to take a job or stay in a job despite being engaged in litigation against the employer, whereas employees suing or threatening to sue their employers can often be regarded by the employer as having repudiated the relationship.

Cases like Chevalier, Russo v. Kerr, and Ghanny leave a general impression that there's nothing weird or extraordinary about expecting an employee to stay in the job while suing their employer - regardless of whether or not the constructive dismissal claim is warranted. (Okay, maybe the employer breached your contract, and maybe you had to sue them for a remedy, but that doesn't mean you can't stay in the job while doing so...)

On the other hand, when an employer turns around and fires an employee for taking a position they've been constructively dismissed, that's generally found to be justified, because, well, why should an employer have to continue a relationship with someone who feels their contract has been fundamentally breached?

In cases like Zaraweh and Suleman, actually suing the employer in constructive dismissal was treated as a repudiation of the contract, entitling the employer to accept the repudiation and terminate the relationship.

In Skidd v. Canada Post Corporation, a trial judge - affirmed by the Ontario Court of Appeal in 1997 - concluded that instructing a lawyer to send a demand letter threatening litigation for constructive dismissal justified Canada Post in turning around and firing the employee.  The British Columbia Court of Appeal reached a similar conclusion in 2012 in Grewal.

The same thing happened in Kucera v. Qulliq, where the letter was seen as repudiating the relationship.  The Nunavut Court of Appeal agreed that her letter - by indicating that she was staying in the role so long as negotiations were ongoing and making progress - amounted to a repudiation of the contract, entitling the employer to accept the repudiation and immediately terminate the employment relationship.

(Worth noting: Whereas her letter said she'd stay "so long as" conditions were met, the Court of Appeal's paraphrase added a word, that she would stay "only so long as" the conditions were met. This is linguistically significant - what she ACTUALLY said is "I'm not quitting yet", whereas the Court of Appeal interpreted her as saying that "I will quit if you don't meet my terms." More importantly, given that employees are contractually entitled to resign on notice, it wouldn't even be a repudiation to threaten to quit unless the threat expressly says you'll do it without notice. Kucera really is a terrible decision.)

Bottom line: When an employer actually breaches the employment contract, the courts are very willing to tell employees that they should stay in the role anyways...but if an employee dares accuse an employer of breaching the employment contract, that's conduct incompatible with continuing the relationship.

This double-standard is particularly absurd when you consider the general imbalance of power and relative sophistication of the parties in most employment relationships: An individual employee's involvement in contentious legal proceedings, and the cost of doing so, is extraordinary, but they're expected to take 'suing the employer' in stride and still report to work and take day-to-day direction from the employer; whereas the business, for whom legal expenses and periodic litigation are usually simply the 'cost of doing business', is entitled to take a threat of legal action from an employee as entitling it to treat the entire relationship as being at an end.

And this line of cases is particularly troubling when you consider the seldom-explored issues of non-fundamental breaches by employers, as I discussed last time: How do you seek a remedy for the employer's breach if doing so will be seen as breaching or repudiating the ongoing contract?

The Practice: No Remedy, No Right

I've practiced this area of law for a lot of years now. I generally advise clients away from quitting and claiming constructive dismissal, where they have a choice.  I've wandered into very few still-existing employment relationships.

In one scenario, a non-union employee - following a formal investigation that followed a deeply flawed process that didn't accord with the employer's policies - was hit with an unpaid suspension. The unpaid suspension was academically a constructive dismissal, so I wrote a demand letter wanting back pay and the removal of the disciplinary notice from his file. They got good legal advice, paid the back pay, but basically told me 'where to go' on the disciplinary notice issue. (In the circumstances, though, I'd defanged the disciplinary notice by highlighting its defective process - while sheltering my attack behind a very legitimate constructive dismissal claim that prevented the employer from taking the position that my letter repudiated the employment relationship.)

Usually, however, not even that. Quitting and suing is almost always a terrible idea, even in the face of objectively awful employer conduct, unless it comes to the point of creating a mental health crisis for the worker. (And yes, it sometimes gets to that point.)

Even if a constructive dismissal can be made out, the employer's ability to rely on a mitigation argument is utterly nuclear in terms of its ability to make unilateral changes to employment contracts with impunity.

Proposal: A Conventional Mitigation Analysis

I have long been of the view that the expectation for an employee seeking a mitigation position - i.e. that it's reasonably comparable with due regard to their skills and experience, etc. - aligns relatively well with doctrine of constructive dismissal. A sufficiently dramatic change to create a constructive dismissal will usually, in and of itself, put the revised role outside the scope of what an employee would ordinarily be expected to take in mitigation.

So when assessing the availability of a 'changed' job with the existing employer, rather than a presumption that the employee should stay there barring an atmosphere of hostility, the fact that it's an offer from the same employer who breached the original contract should create an additional barrier to mitigation:

First, you assess the job as if it's coming from a different employer altogether, and ask if turning down such a job (existing relationship aside) would ordinarily amount to a failure to mitigate. If so, you go on to a secondary question and ask if there's anything in the relationship itself that would justify an employee turning it down - in an analysis that would be akin to the 'atmosphere of hostility' analysis, but broader, encompassing practical questions as to whether or not the parties anticipate needing to litigate their previous disagreements, whether or not the manner in which the employer constructively dismissed the employee in the first place is such that would warrant ongoing distrust by the employee, etc.

In practice, what this would mean is that a mitigation offer from the employer, among other things, has to include a reasonable 'make whole' remedy: You laid me off without a contractual basis to do so? Before my 'duty to mitigate' ought to require me to accept a recall, that recall should include compensation for losses flowing from the breach, and reasonably satisfactory assurances that it won't happen again. (AND there's a good faith component: If I reasonably suspect that there was a deliberate intention to permanently get rid of me, all bets are off.)

(The 'past relationship' analysis isn't strictly limited to this context. In theory, you might see a scenario where an employee gets a mitigation offer from an employer with whom there's a historical relationship, in which case the existence and nature of that relationship would justifiably inform whether there's an obligation on the employee to take it. In practice, if my historical employer offers me a job and I turn it down on the basis that I found the boss' management style to be overbearing and anxiety-inducing, it's unlikely that a court would second-guess my decision to decline to return to that environment.)

Thus, 'mitigation with the same employer' cases should be extraordinary, an issue to flag only in cases where the employer has taken the necessary steps to right its own wrongs, and not a run-of-the-mill barrier that prevents employees from being able to stand on their contractual rights in nearly every case.

*****

Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.

This post does not contain legal advice, but only general legal information.  It does not create a solicitor-client relationship with any readers.  If you have a legal issue or potential issue, please consult a lawyer.