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Silva v. Leippi: Is Employment Law Losing Touch with Common Sense?

Should we aim for legal rules and reasoning that can be applied and understood by non-legal experts?  Or is an objective of law to privilege legal experts?

I thought about these questions as I tried to make sense of this little  head-scratcher of a case from B.C. about a guy who was wrongfully dismissed but entitled to no damages because of his failure to mitigate.  I understand that it can be filed away as a simple “failure to mitigate” case, but I think your average person would find the outcome quite strange.  Try to make sense of the situation employee Silva finds himself when attempting to recover his contractual entitlement to reasonable notice from Company A.

If he came to you for advice, how would you explain the way the law treats his entitlement to reasonable notice under his employment contract?

The case is called Silva v. Leippi

Key Facts: Silva worked for 4 years for Company A in a car salvage business that involved buying old cars and then selling the car parts.  Company A permitted Silva to run a side-business of his own doing the same work, which supplemented Silva’s income.   Company A was then sold to O.  O offered to keep employing Silva at the pay rate he was receiving from Company A, but without the right to run the side business.  Silva thinks that offer is deficient, and he makes a counter-proposal to O that includes a 33% raise.  O refuses the offer.   Silva is dismissed by Company A, which refuses to provide him with his contractual entitlement to reasonable notice.  Silva sues to recover it.

Decision:  Silva was entitled to four months reasonable notice under his contract with Company A, but he doesn’t get it because his refusal to take the offer from O constitutes a failure to mitigate.

Reasons: The key issue here was whether Silva had failed to mitigate his losses by refusing a reasonable offer of employment by O at the same pay rate he was earning at Company A, but without the right to carry on the side business that he had enjoyed at Company A.  The Court applied the test in the Supreme Court of Canada decision in Evans v. Teamsters:

As stated above, reasonableness in this context is determined in accordance with the standard set down in Evans, in which the Supreme Court held that a reasonable person is expected to accept an offer where the salary is no less than at the former job, the working conditions are not significantly different, and relations would not be acrimonious.

The Court ruled that the offer from O involved the same salary, and the removal of the right to run a side business while at work did not amount to a change so substantial that a reasonable employee would be justified in refusing the offer.  Therefore, Silva should have worked the four months’ notice period with O, in which case he would have suffered no loss from the breach of contract by Company A.

Would this case make sense to the layperson?

This case demonstrates how courts have made employment law so complicated that average employees and employers without expert legal advice struggle to make any sense of it all.

Think about what happens here. Company A dismisses Silva but refuses to provide him with reasonable notice, as required by his employment contract.  You might think that Company A should be required to comply with its contract.  You would be wrong.

No matter what choice Silva makes here, he will never recover his contractual notice pay from Company A.   Silva rejected the job offer from O because he felt he was being undervalued by O.  Result:  he forfeits his entitlement to notice from Company A for failure to mitigate.   If he had accepted the job at O, then he also would have forfeited his notice entitlement from Company A, since O would have paid him wages for the period of notice. In either case, Company A is off the hook for its contractual obligation to Silva.

Head-Scratcher:  So what does the law tell Silva he must do here?

Silva must reject O’s deficient (in his mind) offer of employment, but then nevertheless report to work at O for the next four months and work under the deficient terms.  This assumes: (1)  that Silva, Company A, and O know what the period of ‘reasonable notice’ is under the contract with Company A (they could only guess at this point, and would probably need lawyers to help with that guess);  and (2)  that O would still be willing to employ Silva, knowing that he is only coming to work begrudgingly as part of his mitigation under the contract with Company A, and not because he actually wants to work for O under the deficient terms.  In fact, Silva may hate being at O every day, but if he shows this sentiment, he could be dismissed by O, perhaps for cause. (Bonus question: What would that mean for his duty to mitigate under his contract with Company A?)

After the period of notice under his old contract with Company A is up, he would presumably be entitled to quit O, since he is only working there to mitigate his loss resulting from Company A’s breach of contract, not because he wants to work for O.  Perhaps the contract between Silva and O would be treated as a fixed term contract for the length of reasonable notice under Silva’s employment contract with Company A.  In that case, neither O nor Silva would be required to give new notice to terminate the contract.

Since he has now quit O, Silva will no doubt run into big problems trying to recover unemployment insurance benefits he would have been entitled to after his termination from Company A–since employees who quit are usually disqualified from EI.  He would have to convince EI that he never wanted to work for O in the first place, but that he was forced to do so because of his duty to mitigate his losses flowing from Company A’s breach of contract, which was a breach only in theory, since no damages were recoverable. Silva could argue before the EI folks that he did not in fact quit, but that the contract with O was for a fixed term, and it simply expired.   That would be a proper argument, though I highly doubt any EI adjudicator would grasp it.  Certainly Silva would need a good employment lawyer if he were to win such an argument.

Any of this make sense to you, layperson?

Whose interests do you think this labyrinth of legal reasoning is intended to protect?

O, and one last question:  Is Silva entitled to statutory notice of termination from Company A, since statutory notice is not subject to the duty to mitigate?

 


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One Response to Silva v. Leippi: Is Employment Law Losing Touch with Common Sense?

  1. Dennis Buchanan Reply

    December 13, 2011 at 6:37 pm

    Wow, this is a bad one. I’ve long believed that the mitigation approach used in Evans and Mifsud is deeply flawed, but this is a whole other level. He was fired on May 15th; how can he possibly have failed to mitigate by impliedly rejecting O’s implied employment offer on May 9th? It doesn’t appear to me that there is any reason to believe that the offer remained open after May 15th.

    Not a technicality, either. If you regard A and O as being essentially the same employer (which is not unfair, given the application of the Evans framework), then the employer could have said “We’re changing the terms of your employment”. If he quits rather than accept the change, then he might argue constructive dismissal. See Mifsud – the analysis becomes very akin to Evans, rightly or wrongly, which is applied in this case. If he doesn’t comply with the change but still reports to work, that might create just cause to terminate him. But those things didn’t happen. He didn’t quit. He didn’t fail to comply with new employer directions. He simply tried to negotiate in the face of changes to his employment conditions.

    There’s almost a subtext of just cause: The trial judge seemed pretty critical of the employee’s attempt to “extract” a higher wage from the purchaser, pressing a perceived bargaining advantage, making them not want to hire him. Really? There’s something wrong with trying to bargain?

    In broad terms, I’ve argued that the “employment with the same employer” mitigation cases are out of step with the rest of employment mitigation cases, and I would suggest that the most obvious incoherencies of it can be seen in the Mifsud-type constructive dismissal cases (which are the most common): An employer takes an action that it is not entitled to do, unilaterally changing the contract in a way that fundamentally breaches it…but is nonetheless entitled to expect the employee to accept the changes in mitigation of the loss?

    It doesn’t make sense, and it’s the consequence of two overlapping legal tests that look at essentially the same facts for essentially the same purpose – determining whether or not employment conditions are equivalent – and applies inconsistent thresholds.

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