Employers Lose a Tool from the Tool Box When Negotiating With Constructively Dismissed Employees

The Supreme Court of Canada held in Evans v. Teamsters Local Union No. 31, 2008 SCC 20 that an employee who has been constructively dismissed may be obliged to return to work for his or her former employer in order to mitigate their damages. The Court stated that there was no difference between asking a dismissed employee to return to work in order to mitigate his or her damages and providing the employee with working notice of dismissal. This is because there is no reason to distinguish between a constructive dismissal and a wrongful dismissal when evaluating the duty to mitigate since both types of dismissals are the result of the employer terminating the employment contract without cause.

Employers have relied on Evans as leverage when negotiating settlement packages with employees who claim they were constructively dismissed. In these negotiations an employer will typically take the position that: (i) the employee was not constructively dismissed, and (ii) even if the employee was constructively dismissed, applying Evans, the employee should have remained with the employer to mitigate his or her damages. Having failed to mitigate his or her damages, the former employee should be prepared to accept a lower settlement package.

The Ontario Court of Appeal recently clipped the wings of any employer intending to rely on Evans as leverage when negotiating severance packages with a constructively dismissed employee.  In Farwell v. Citair, Inc. (General Coach Canada)2014 ONCA 177 at para. 20 the Court held if the employer intends to trigger the form of mitigation duty described in Evans it will be obliged to offer the constructively dismissed employee the clear opportunity to return to the workplace for the balance of the notice period.  In other words, an employer must ask a dismissed employee to return to the workplace if it intends to take the position that the constructively dismissed employee failed to mitigate his or her damages by leaving the workplace. This is significant because, in practice, often neither the employer or the former employer are interested in resuming the employment relationship.

Applying Farwell employers are now be left with a choice – either abandon Evans as a negotiating tool or assume the risk that if they ask a former employee to return to the workplace that the former employee might call their bluff and accept the offer.

Requiring a constructively dismissed employee to return to work for his or her notice period can be a cost effective dismissal strategy if the employer is confident the employee will continue to perform his or her duties without causing any disruptions to the workplace.  The impact of Farwell is to eliminate what had been a fairly effective negotiating tool for employers – claiming that a former employee should accept a lower severance package because the employee never returned to the workplace in circumstances when the employer had no interesting in having the employee return to work.

Phil White is a Toronto employment lawyer at Grosman, Grosman & Gale LLP.