Offers of Re-employment in Constructive Dismissals, The Law Times (February 25, 2019, p 7)

By Nikolay Y. Chsherbinin

Layoffs are spells of employees’ temporary unemployment. At common law, employers have no right to lay employees off. Nor does the Employment Standards Act, 2000 give employers such a right; rather, it regulates the periods and effects of layoffs when the right exists.

Absent an express or implied term in a contract of employment to the contrary, a unilateral layoff is a constructive dismissal that entitles employees to damages. Once dismissed, employees are ordinarily required to mitigate their losses, sometimes by returning to work for the dismissing employer. A case in point is Gent v. Strone Inc., 2019 ONSC 155, where the court resolved that the employee failed to mitigate his damages by refusing to resume his former employment and, as such, declined to award him wrongful dismissal damages.

In Gent, due to a significant decrease in business, Strone Inc. temporarily laid off its veteran employee, David Gent. At the time, Gent was 53 years old, had worked for Strone for 23 years and occupied the position of a health and safety training specialist, where he earned $72,000 per annum. Strone advised that it would recall Gent back to work as soon as business improved. In response, Gent informed Strone that he considered his temporary layoff to be a constructive dismissal and sued for wrongful dismissal. Two weeks later, Strone recalled Gent to work. Gent did not accept, because he felt that the relationship had broken down and it would have been embarrassing and degrading for him to return to work.

On a summary judgment motion, the motions judge agreed that Gent was constructively dismissed because there was no sufficient evidence to support Strone’s argument that it had a contractual right to temporarily lay off Gent. Consequently, the motions judge concluded that Gent would have been entitled to 18 months’ pay in lieu of reasonable notice. However, because the motions judge also found that Gent failed to mitigate his damages by refusing to accept Strone’s offer of re-employment, his recovery was reduced to $4,846.15, being the amount that he would have earned between the date of the temporary layoff and the date of the recall.

In Evans v. Teamsters, Local 31, 2008 SCC 20, the Supreme Court of Canada explained that where an employer offers an employee a chance to mitigate damages by returning to work for the employer, the central issue is whether a reasonable person would accept such an opportunity. This requires a multi-factored and contextual analysis. A reasonable person is expected to return to work for the dismissing employer where the salary offered is the same, the working conditions are not substantially different and the personal relationships involved are not acrimonious. The critical element is that an employee is not obligated to mitigate by working in an atmosphere of hostility, embarrassment or humiliation. The reasonableness of an employee’s decision not to accept the recall is assessed on an objective standard.

In Gent, the motions judge accepted Strone’s evidence that it would have treated Gent normally with no reprisals or hard feelings and rejected Gent’s assertion that it would be too embarrassing and degrading for him to return to work, because no evidence was adduced to corroborate his subjective belief. Gent’s argument that the offer of re-employment was made after he had already commenced litigation failed to persuade the motions judge of the inappropriateness of Gent resuming his former employment. Having acknowledged that the existence of litigation is a factor that must be considered, the motion judge brushed it aside as being non-determinative and concluded that based on the objective standard Gent should have accepted Strone’s offer of employment to fulfil his duty to mitigate. Failure to do so disentitled Gent to wrongful dismissal damages.

Curiously, the decision is silent about Gent’s entitlements to the statutory minimums under the ESA. When Gent’s employment was wrongfully terminated, he was entitled to termination and severance pay under the ESA. Given the length of his employment, s. 57(h) and 61 of the ESA entitle Gent to pay in lieu of notice in the amount that he would have earned during the eight-week statutory notice period. Assuming that Strone qualified as a severance pay employer under s. 64(1) of the ESA, Gent would also be entitled to 23 weeks’ salary of severance pay, thereby bringing his total statutory entitlements to 31 weeks’ (or 7.16 months’) pay. In Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402, the Court of Appeal for Ontario made it clear that statutory entitlements are not damages and, thus, are not subject to mitigation. They are not linked to any actual loss suffered by the employee, but they are payable in any event. Arguably, Gent’s recovery should not have been limited to $4,846.15, but it should have included the ESA amounts.

Gent serves as a reminder that, in appropriate circumstances, an employee can be required to return to their workplace, even after a constructive dismissal. An offer of re-employment does not change the fact that an employer wrongfully breached a contract of employment. It serves to provide an opportunity for the employee to mitigate their loss resulting from the breach. It matters not that an employer’s recall is motivated by a desire to avoid the payment of damages; rather, what matters is whether an employee may be exposed to hostility, embarrassment or humiliation upon returning to the workplace, thereby excusing them from the obligation to mitigate the damages they have or will sustain by returning to their former position.

Dismissed employees must lead evidence capable of corroborating their subjective beliefs as to why resuming their former employment is not appropriate in their particular circumstances. Failure to do so is perilous. Prudent employers should be careful about recalling employees with a view to minimizing their exposure to damages, especially in those instances where there is live litigation, because an aggrieved employee can do exponentially more damage to both morale and business as a whole.