Canadian Employment Law Today

Canadian Employment Law Today Canadian Employment Law Today | | 3 Canadian HR Reporter, a Thomson Reuters business 2014 Cases and Trends Cases and Trends Option to keep working must be clear for dismissed workers Off er to remain employed as means of mitigation must be clearly made to employee: Ontario Court of Appeal BY TOM GORSKY AND STEPHEN SHORE FACED WITH an ever-shifting business landscape, employers periodically fi nd it necessary to reassign duties within the workplace. However, an employer-imposed alteration of duties carries with it a risk an employee may claim constructive dismissal. An Ontario employer recently learned that a failure to adhere to a technical legal re- quirement can lead to liability. In earlier years, General Coach Canada was primarily engaged in the manufacture of travel trailers, fi fth wheels, truck camp- ers and motor homes at its plant in Hensall, Ont. However, as market demand shifted, focus narrowed to the production of park model homes and pre-fabricated cabins. General Coach's vice-president of opera- tions, Kenneth Farwell, was a long-term em- ployee with 38 years' tenure. He had worked his way up the ranks, having started in an entry-level position. Unfortunately, Farwell lacked expertise and experience in Gen- eral Coach's new product lines — in con- trast to his immediate subordinate, Wayne Meidinger, who was an expert. With challenging economic times ex- acerbating matters, General Coach de- cided business imperatives mandated that Meidinger's greater expertise be exploited by his assuming Farwell's role. As a result, Farwell was off ered the position of purchas- ing manager which he had held earlier, but with no change in salary from his vice-pres- ident position. Shift in job leads to constructive dismissal claim Farwell turned down General Coach's pro- posal because of the position's lower status and requirement that he report to an em- ployee who previously reported to him. He launched a lawsuit claiming constructive dismissal. At trial, the judge agreed with Farwell that the legal test for constructive dismissal had been satisfi ed. However, a fi nding of constructive dismissal did not automati- cally mean Farwell was entitled to a legal remedy. Farwell had a duty to mitigate his losses, which in this case, might have meant taking the position of purchasing manager throughout the period determined to be of reasonable notice. e mitigation evidence before the court was that Farwell had made eff orts in a poor economy to fi nd other employment but was not successful for many months. Gen- eral Coach argued that as part of his legal duty to mitigate his damages, Farwell was obliged to accept the purchasing manager position; the salary and working conditions would have been almost the same as for his previous position, the only diff erence being a likely reduction in bonus. Giving eff ect to this argument would have eliminated Farwell's damages. e trial judge rejected General Coach's argument because, in the judge's view, it would have been "humiliat- ing and embarrassing … in (Farwell's) mind" to be required to work in a lower position and report to his previous subordinate." General Coach appealed to the Ontario Court of Appeal on the basis, claiming the trial judge erred in applying a subjective test as to what was "in Mr. Farwell's mind," rather than applying the legally required objective test. Employer should have followed up with off er e Court of Appeal declined to consider whether the trial judge had applied the cor- rect legal test, focusing instead on what it saw as a fatal omission on the part of Gen- eral Coach once Farwell had turned down its off er. According to the Court of Appeal, after learning of Farwell's constructive dis- missal claim, General Coach should have followed up with him to advise him that the off er of becoming purchasing manager re- mained open as a means of mitigation. By not having done that, Farwell's failure to ac- cept the new position could be not seen as a failure to mitigate. "(General Coach's) mitigation argument presupposes that the employer has off ered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, (General Coach) was therefore obliged to off er Mr. Farwell the clear opportunity to work out the notice pe- riod after he refused to accept the position of purchasing manager and told (General Coach) that he was treating the reorganiza- tion as constructive and wrongful dismissal. ere is no evidence that (General Coach) extended such an off er to Farwell. Accord- ingly, Farwell did not breach his mitigation obligation by not returning to work," said the appeal court. Tips for employers Making changes to an employee's position is a tricky business, with many pitfalls for even the best intentioned employer. To minimize the risk of a successful constructive dismiss- al claim, employers are reminded of the fol- lowing important points: Constructive dismissal is not just a matter of compensation. If a restructuring results in a reduction of an employee's status and prestige, the employee may have a valid constructive dismissal claim, even if income is unchanged. e obligation to mitigate by remain- ing with the terminating employer only arises if there is a clear opportunity to mitigate. If an employee rejects continued employment, and proceeds to assert a con- structive dismissal claim, an employer must off er an opportunity for re-employment to invoke an employee's duty to mitigate vis-à- vis that off er. e obligation to mitigate by re main- ing with the terminating employer is as- sessed on an objective, "reasonable per- son" standard. Even if it is suspected that an employee will not accept a new role, the court will apply an objective, "reasonable person" test, considering such factors as how the employee was treated on termina- tion, his history with the company, and how and why the new role was created. If an em- ployer is able to show a "reasonable person" would have returned to the employer, then the employee could be found to have failed to mitigate. Legal advice usually required. Because of the complexity and tact required in this legal area, it is highly advisable for an em- ployer to seek out legal advice before taking steps involving substantial changes to an employee's position. Once a constructive dismissal has been commenced it is often diffi cult to turn back the clock. For more information see: • Farwell v. Citair Inc, 2014 CarswellOnt 2573 (Ont. C.A.). Tom Gorsky and Stephen Shore are lawyers with Sherrard Kuzz LLP, a management-side labour and employment law fi rm in Toronto. Tom and Stephen can be reached at (416) 603-0700 (Main), (416) 420-0738 (24 Hour) or by visiting www.sherrardkuzz.com.

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