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Know When to Fold ‘Em: Court Calls Employer’s Bluff on Mitigation

Ever since the Supreme Court’s ruling in the now-famous (at least in employment circles) Evans v. Teamsters case, employers have had a new “weapon” at their disposal in wrongful dismissal cases: mitigation.  Mitigation of damages, in the context of a wrongful dismissal, is the reduction of one’s damages through alternate employment.  Briefly, a dismissed employee has a duty to mitigate his or her damages by searching for alternate employment; any mitigation that is achieved is subtracted from any damage award for reasonable notice.  Further, if the Court finds that appropriate mitigation efforts were not made, or ignored, the Court can also reduce the damage award.

While the obligation to mitigate has long existed in wrongful dismissal cases, Evans broke new ground when the Supreme Court pronounced that the obligation to mitigate goes so far as to require a dismissed employee to even accept alternate employment with the same employer.  This was seen in some circles as a major breakthrough for employers, and in one sense it certainly is: when dealing with changing terms and conditions of employment, claims of constructive dismissal can often be diminished – if not negated – with the proper execution of the offer of alternative employment, given this extension of the duty to mitigate.

However, as one Newfoundland employer recently found out, simply relying on the mitigation obligation in a wrongful dismissal case is not necessarily going to win the day.  This is especially true when the offer made to the employee is insincere and when the employer’s conduct leaves something to be desired.  In such cases – where the employment relationship has been damaged – Evans says that an employee would not necessarily be required to accept alternate employment (or re-employment as the case may be).

In Fredrickson v. Newtech Dental Laboratory Inc. the employer, Newtech, terminated the employment of Ms. Fredrickson in July, 2011 when it purported to lay her off.  In the fall, Ms. Fredrickson filed a wrongful dismissal lawsuit against Newtech.  Subsequent to Ms. Fredrickson filing her lawsuit, Newtech made several offers to re-employ her.

At trial, Newtech was successful in convincing the judge that Ms. Fredrickson had failed in her duty to mitigate by not accepting the offer(s) of re-employment, relying on the reasoning in Evans.

However, the Court of Appeal delved deeper into the analysis of two specific aspects: the substance of the offer(s) of re-employment and the state of the employment relationship.  Citing the idea that the “contract of employment is typically of longer term and more personal in nature than most contracts, and involves greater mutual dependence and trust”, the Court found that Newtech’s various offers of re-employment were not “make-whole” offers, and also that Ms. Fredrickson’s supervisor discussed the fact that she would not likely return in the circumstances.  Accordingly, the Court of Appeal found that “any chance of repairing the employment relationship was irretrievably lost” and that Ms. Fredrickson could not have been expected to mitigate her damages by accepting any of Newtech’s offers.

This stands as a lesson to employers that to rely on the wrongfully-dismissed employee’s obligation to mitigate is not a foolproof strategy.  As mentioned, when seeking to implement changes to conditions of employment the Evans decision certainly provides some assistance in protecting employers from claims of constructive dismissal.  However, if an employer simply makes an offer of re-employment knowing the employee could never accept and therefore thinks itself absolved under the doctrine of mitigation, that employer must be prepared to live with the consequences of having its bluff called.  Click here for a list of experienced lawyers at CCPartners who can help you navigate the waters of employment litigation.