Does the Duty to Mitigate Require a Dismissed Employee to Accept Re-Employment with their Former Employer?

By Carman J. Overholt, Q.C.

In a recent decision 1 , the BC Court of Appeal considered whether a dismissed employee had a duty to accept reemployment with their former employer as part of their obligation to mitigate damages that arise from the employee's dismissal. In rendering its decision, the Court examined the scope of the duty to mitigate in this context, emphasizing the essential nature of trust inherent in the employment relationship.

Fredrickson v Newtech

This dispute involved an employee of eight and a half years who was laid off after returning from a medical leave. The employee's position was that her employment was terminated, and that she was entitled to damages for wrongful dismissal.

In the course of proceedings against her former employer, Ms. Fredrickson was given several offers of reemployment, including the option to return to her original position with the same salary and benefits. Ms. Fredrickson declined all offers and argued that the employment relationship was irreparably broken and that it was no longer reasonable for her to return to her previous employment.

At issue was whether or not the employee had an obligation to accept any of these offers. At trial, the Court concluded that the employee ought to have accepted reemployment and that by failing to do so, she had failed to mitigate the damages arising from the termination of her employment.

In rendering its decision, the Court of Appeal emphasized the importance of carefully considering the level of trust between the employee and employer, in addition to the reasonableness of refusing to continue the employment relationship. The Court allowed the appeal of the trial judge's decision on the grounds that it was not reasonable to expect Ms. Fredrickson to return to employment with this employer.

The Law

An employee who has been wrongfully dismissed is entitled to reasonable notice of dismissal, or payment in lieu of notice. However, an employee cannot recover damages arising from the termination of their employment if the employer can demonstrate that the employee did not take proper steps to mitigate their losses. An employer can allege that the employee did not take adequate steps to find a new job, for example. The onus is on the employer to establish a claim that the employee has failed to take reasonable steps to mitigate their loss.

A relevant consideration is whether the duty to mitigate includes an obligation to continue employment with the former employer. The Court in Fredrickson carefully reviewed the law that has developed in this area, notably the leading case of Evans v Teamsters Local Union No. 31 2 . Evans emphasizes that the central issue surrounding return to work mitigation is whether or not a reasonable person would accept the opportunity (at paragraph 30). Inherent in this reasonableness is both the nature of the employment contract, as well as the nature of the working environment. A reasonable person should not be expected to return to a job with a markedly different salary or with substantially different duties; nor should they be expected to return to an environment where the conditions are openly hostile, or incompatible with maintaining a positive working relationship with the employer.

Fredrickson emphasizes these considerations in determining whether a duty to return to work exists. The Court held that the trial judge did not consider the "incomplete" nature of the return to work offers. Despite offering her original salary and benefits, the offers did not account for the wages lost in between her dismissal and her offer of reemployment. The offer did not put the employee in the position she would have been had the breach of contract not occurred - a fundamental tenant of damage assessment.

The Court also held that the trial judge failed to consider the importance of trust inherent in the employment relationship and the breakdown of the employment relationship when that trust no longer exists. It is not enough that an employer have full trust and confidence in an employee; the employee must be assured of fidelity on the part of their employer in order for the employment relationship to be conducive to a reasonable working environment. As the Court noted: "Just as trust of an employee, in the circumstances of the employment, is an important aspect for the employer, so too trust of the employer is important" (at paragraph 29).

In Fredrickson, the Court pointed to two independent incidents that contributed to the breakdown of trust in the employment relationship. On two occasions the employer was found to have recorded conversations with the employee and used them to the employee's disadvantage. Additionally, the employer engaged in conversation with other staff about the employee's situation, which the Court found to be a breach of confidence generally expected in a supervisor or employer. The Court found that it would not have been unreasonable for the employee to refuse to return to work under these egregious circumstances.

By failing to account for both the nature of the offer and the nature of the employment relationship, the Court found that the trial judge erred in finding that the employee failed to mitigate her damages.

The Implications of this Decision for Employers

Employers should be aware that a dismissed employee is not obligated to accept an offer of reemployment in order to mitigate any losses arising from their dismissal. The similarity of the offer to their original employment contract is not the only consideration that the Court will take into account, as was the case in Fredrickson. It is equally important that the Employer take every effort to maintain the integrity of the employment relationship, and to preserve the element of trust that flows mutually between employee and employer. Any evidence that gives the employee a basis for mistrust will undermine any attempt to renegotiate the terms of continued employment.

1 Fredrickson v Newtech Dental Laboratory Inc., 2015 BCCA 357.

2 Evans v Teamsters Local Union No 31, 2008 SCC 20.