Mitigate Your Losses or Lose Your Case

Evans v. Teamsters Local Union No. 31 – Supreme Court of Canada – May 1, 2008

An employee’s failure to reasonably mitigate their damages during the post-termination period by refusing comparable temporary reemployment with the terminating employer may result in a loss of damages otherwise awarded.

The recent Supreme Court of Canada case of Evans v. Teamsters Local Union No. 31 [2008] S.C.J. No. 20 (“Evans”), sheds light on what is required of an employee in order to fulfill their duty to mitigate during the post-termination period. The Court decided on May 1, 2008 that the terminated employee failed to mitigate his damages during the notice period by refusing to accept comparable temporary reemployment with the terminating employer. This resulted in the Court upholding the Court of Appeal’s decision to set aside all of the damages awarded by the Trial Judge for wrongful dismissal.

The employee in Evans was terminated from his employment. The employee’s counsel stated in a letter to the employer that the employee was entitled to reasonable notice and that the employee would be prepared to take twenty-four months notice, twelve months of which would be working notice and the remaining twelve months as pay in lieu of notice. The employer responded by stating that they were not prepared to accept this offer and that the employee was to return to work to commence working notice for the remaining twenty-four month notice period. Additionally, the employer stated that if the employee did not accept this, then the employer would terminate the employee without notice. The employee rejected this offer, resulting in his dismissal without notice. The employee then brought a claim for wrongful dismissal.

Deciding on the matter, the Trial Judge found that the employee had been wrongfully dismissed and awarded damages for lack of notice. On appeal by the employer, the Yukon Territory Court of Appeal ruled that the damages awarded by the Trial Judge should be set aside due to the employee’s failure to mitigate by refusing the offer of reemployment.

In rendering a decision, the Supreme Court of Canada stated that “requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself.” The Court continued by stating, “The critical element is that an employee –not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation’ (Farquhar, at p. 94)…Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer…it is extremely important that the non-tangible elements of the situation – including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements – be included in the evaluation.” Finding that the offer of reemployment made to the employee was similar to the employee’s previous employment, it was a position that a reasonable person would have accepted, and it did not entail any barriers which would have barred the employee from accepting it, the Supreme Court of Canada decided to uphold the Court of Appeal’s decision to set aside all damages awarded by the Trial Judge due to the employee’s failure to mitigate damages.

The Supreme Court’s decision in Evans sends a strong message; an employee may have to accept reemployment with a terminating employer in order to mitigate damages if it is reasonable, even though the employee may be apprehensive about it. This decision certainly provides employers with more incentive to offer departing employees working notice, since the potential refusal of such a reasonable offer may carry with it the reduction or complete loss of damages to which the employees may otherwise be entitled. However, this decision is also important for employees. If the result of not fulfilling the duty to mitigate is either a reduction or loss of possible damages, employees should be more conscientious then ever in making sure that they act reasonably and take sufficient steps in regards to mitigation.

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