For most employees, the elimination of their position results in the termination of their employment and a severing of the employment relationship. But in some instances, employees are presented with 2 options – termination or a new offer of employment in a different position. Sometimes the terms of the new offer of employment are very similar to their current terms; other times the new offer is for a demoted position with reduced compensation. In such a scenario, what is the obligation of the employee? Is the employee obligated to accept the lesser terms and does the refusal to accept those new terms result in the employee failing to mitigate their damages?
In the recent case of Fillmore v. Hercules SLR Inc., 2016 ONSC 4686, the Ontario Superior Court dealt with this issue. After more than 19 years of employment, Fillmore, a 51 year old Director of Purchasing, was informed by Hercules SLR Inc., that his position was being eliminated. The employee was provided with two letters at once – one outlining his termination package and the other offering continued employment in the new position of Supervisor Service. The new position came with a 20% reduction in compensation, however the employer offered to guarantee the employee’s previous salary for 6 months before implementing the reduced compensation package. The employer provided the employee with a deadline to accept either option. When the employee did not make a selection by the deadline, the employer proceeded with the termination. The employee brought an action for wrongful dismissal, seeking notice. At a Summary Judgment Motion, the Judge determined that the employee was entitled to 17 months notice and that the employee had not failed to mitigate his damages by refusing the new offer of employment.
In rendering a decision the Judge looked at the timing and substance of the new offer of employment. The Judge determined that the new offer of employment was not an offer to work through the notice period as discussed by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31 (2008), but was really an offer of a new, full time, demoted position. In Evans a terminated employee was asked to continue to work throughout the notice period and the Court determined that the employee’s refusal to do so resulted in the employee failing to mitigate his damages. In Fillmore the Court also determined that the employer’s new offer was not a reasonable offer of employment due to the demoted position and reduced earnings. As a result, the employee was not obligated to accept the new terms of employment as a means of mitigating.
Lessons for Employees
When presented with the option of termination or a new position, it is important to look closely at the new terms of employment that are being presented. If the new terms of employment are not comparable, the offer may not be reasonable from a legal standpoint and there will be no legal obligation on that employee to accept the revised terms. However, if the new terms are comparable, it may be reasonable for the employee to accept those terms. The timing of an employer’s request that an employee continue to work in these situations is also very important to determine that employee’s mitigation obligations. An employer’s request that an employee work through the notice period after an employee refuses to accept the new position is more likely to trigger an employee’s mitigation obligation than a scenario where the employee is presented with a new, lesser position as an alternative to termination.
Lessons for Employers
When determining whether to terminate employees or provide the option of a revised position as an alternative to termination, employers should seek the advice of an experienced employment lawyer to provide guidance and recommendations. To trigger the employee’s duty to mitigate, it may be prudent to offer an employee a comparable position rather than a lesser position or consider whether it is appropriate to offer the employee a longer guarantee of remuneration or whether to also offer working notice.
The employee’s duty to mitigate is also more likely to be triggered when the employer requests that the employee work through the notice period after an employee refuses to accept a revised position.
Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.
Sign up for our e-Newsletter for the latest updates and case studies in employment law.