Follow Me on Twitter

Chevalier v. Active Tire: The Mystery of Mitigating in the Job From Which You’ve Just Been Fired

Thanks to law blog of CC Partners for describing a recent decision of the Ontario Court of Appeal that found a constructively dismissed employee had a duty to mitigate his damages by accepting an offer by the employer to be ‘re-employed’ in his old job.  The case is called Chevalier v. Active Tire & Auto Centre.  The Court of Appeal upheld the detailed reasons of the lower court.

These mitigation cases interest me, because they create unworkable scenarios that courts mostly ignore.  It’s conceptual legal reasoning over real life practicality and common sense.

In Chevalier, the court ruled that a temporary layoff of the employee was a constructive dismissal, and that the period of reasonable notice that was required was somewhere between 16 – 24 months.  The reasoning is a bit confusing on this point.  It seems that the court ruled that 24 months was the appropriate notice period, but that 8 months should be deducted from that amount in terms of damages because the employee had received one months’ pay from the employer and 7 months were deducted because the employee successfully mitigated in a new job in the final period of the notice period.

head-150x150

Evans Makes My Head Hurt

So, we have a termination and a finding that 24 months’ reasonable notice was owed Chevalier.  However, he never gets those damages, because the Court ruled that he was required by the duty to mitigate to accept an offer of re-employment by the original employer.  In reaching this decision, the Court applied the Supreme Court of Canada’s reasons in Evans v. Teamsters.  I don’t have a problem with the judge’s application of Evans.

But I still have questions about Evans itself.  I’ve argued before that Evans has created a very strange world for employees.  See my old post about a whacky B.C. decision called Silva v. Leippi that applied Evans, which I called “Is Employment Law Losing Touch With Common Sense?”

Let’s work through the implications of Chevalier.  The employee has been wrongfully terminated, entitling him to damages equal to 24 month’s notice (wages, benefits).  Of course, neither Chevalier nor the employer actually know that the period of notice is 24 months when he is fired.  We only know that is the period of notice because 4 years later, a judge decided this.  So go back in time, to the date of termination in 2008.  What is Chevalier to do?

Questions Arising From the SCC’s Evans’ Decision on Mitigation

He doesn’t want to work for the company that just fired him anymore, but Evans says, unless he wants to forfeit his entitlements under the original contract, he must do so as long as “a reasonable employee” would not think it unreasonable to return to that job.  So Chevalier must decide if it’s “reasonable” for him to return to his old job that he doesn’t want, from which he’s just been fired.  If he makes the wrong decision, he forfeits his damages, which are 2 years’ worth of salary and benefits.  But let’s assume he plays it safe, and he accepts ‘re-employment’.  He is now employed on a new contract of employment (Contract 2), the old one (Contract 1) having been wrongfully terminated.

What are the terms of Contract 2?

Well, they are whatever the employer offers and the employee agrees to.  Maybe they are identical to the terms of Contract 1.  What’s the duration of Contract 2?  Is it a fixed term contract for the period of notice required under Contract 1, which the employer wrongfully terminated?  That would be the logical presumption, since the only reason the employee has accepted Contract 2 is because the duty to mitigate under Contract 1 requires that.  He is mitigating his loss pursuant to the employer’s breach of Contract 1 by working through the notice period required by that contract.  When that notice period is over, so too is his duty to mitigate.  The reason for Contract 2 has expired, and so it would be sensible to assume that Contract 2 comes to an end then too.  But neither party knows for sure what period of notice Contract 1 required.  Chevalier thinks the notice period was 24 months; the employer thinks it was much less, say 16 months.  So which of these periods becomes the fixed term of Contract 2?

Maybe, since there is no agreement on the term of Contract 2,  it becomes a contract of indefinite duration, subject to an implied term requiring reasonable notice. If so, what if the employer terminates Chevalier again, under Contract 2, but before the period of notice required by Contract 1 has expired?   What period of notice must the employer give then, under Contract 2?  Do you add the period of notice remaining under Contract 1 to the period of notice now required by Contract 2?  Is Chevalier entitled to double damages:  damages still remaining from the original breach of Contract 1, plus damages for breach of the notice term in Contract 2?  This must be the logical result, since now the employer has breached not one, but two contracts.

And what if Chevalier decides that the period of notice from Contract 1 is over, so his duty to  mitigate under that contract has come to end?  Can he now just walk away from Contract 2, without giving notice himself?  If he does that, is he breaching Contract 2?  If so, this would likely come as a surprise to Chevalier, since he believed his obligation to perform Contract 2 only lasted as long as his duty to mitigate under Contract 1.  If he guesses wrong about the notice period required either by Contract 1 or Contract 2, he will be treated as having quit Contract 2, and thus would likely be disqualified from  unemployment insurance benefits.  Employees who quit aren’t entitled to those benefits.

Does that seem like a sensible outcome, given that Chevalier only accepted Contract 2 to mitigate his losses from Contract 1, and considering that he would have been entitled to unemployment insurance benefits following his wrongful termination under Contract 1.

I could come up with more complicated scenarios arising from Evans.  You get my point.   I understand the conceptual logic the Supreme Court applied in Evans–trying to treat working notice and damages for pay in lieu of notice on an equal mitigation footing. But in practice, this makes no sense and is unworkable. It works well enough for employers, since when it’s applied, it relieves the employer of its contractual obligations for breaching the contract. But it’s a booby-trap for employees, who can’t possibly be expected to understand the implications of being offered re-employment by an employer that’s just fired them.

It could work well enough if the notice period in the original (wrongfully terminated) contract was fixed, so the period of mitigation is known and clear to both parties.  But that is not how things work in the real world. Neither employee nor employer knows what the period of notice under the original terminated contract is.  Therefore, they do not know for sure how long the period of mitigation lasts.  This creates all sorts of complicated questions relating to the nature of the Second (re-hired) contract, and the duties of the employer and the employer under that new contract.  No employee on the planet would be expected to understand the implications of all of this.  And as great law professor once taught me, a law that is too confusing for an average person to understand is a bad law.  That is especially true in employment law, where one party (employees) often lack the resources to hire expert legal advice.

I predict that one day, Evans will be revisited, or at least it will have to be clarified to explain the answers to the sorts of questions I’ve raised.  A legal rule that is impossible for employees to understand is unsustainable.

 

 

Socialize

4 Responses to Chevalier v. Active Tire: The Mystery of Mitigating in the Job From Which You’ve Just Been Fired

  1. Fernando Reis Reply

    October 17, 2013 at 1:12 am

    What I don’t understand is why an employer would even consider offering the dismissed employee an opportunity to mitigate by offering the employee their former position. I don’t see this in a unionized environment. When a unionized employee is dismissed, they are dismissed until and when an arbitrator orders reinstatement (if successful at arbitration). Of course, the employer could argue that any back pay owing is subject to the mitigation rule. You just don’t see employers offering unionized employees a chance to mitigate. I could never understand why the offer to return the employee in Evans to the workplace as a mitigation opportunity was even made. Employees in certain positions may see this an an opportunity to sabotage their employer, to “get back at them”, so to speak. In Evans, the employee was a union rep. Do you know what kind of damage a disgruntled union rep can do to their employer? And I bet the employer wouldn’t even find out about the damage until long after the employee has worked out his notice period.

  2. Andres Reply

    October 23, 2013 at 10:33 pm

    Fernando,

    It almost exclusively arises when an employer terminates an employee not realizing they are entitled to common-law reasonable notice. The scenario is that the employee is let go, paid their employment standards minimums, and then the letter from the lawyer’s office comes advising that they actually owe 10 times what they’ve paid out. So they decide they would rather bring the employee back for their labour and find a way to make the books balance than just cut a cheque.

    This won’t always work, particularly if the employer terminates the employee for performance reasons and is very critical at the time of dismissal.

    For me the big problem is that it provides employers with way too much latitude to constructively dismiss employees with impunity. As long as you aren’t changing their position too much, or demoting them, you can alter their duties and if they leave a court will find they failed to mitigate by not staying on in the new position even though they may hate it and it’s not what they were hired to do. Abella has a great dissent in Evans that points out this very problem.

  3. Fernando Reis Reply

    October 24, 2013 at 9:23 pm

    Andres,

    Thanks for this. I am more familiar with labour law but the duty to mitigate also applies when a unionized worker is terminated. However, I have never seen an employer offer the terminated employee an opportunity to mitigate. I agree with your view on employers having too much latitude. Thanks for pointing out Abella’s dissent.

  4. Andres Reply

    October 29, 2013 at 9:54 pm

    Fernando,

    If I had to guess, I would say it doesn’t happen in the unionized context because the collective agreements will generally be clear on severance entitlements so the employer won’t accidentally fall into the scenario of not realizing they had to pay someone more than the legislated minimums at the time of termination. And it would sort of screw-up their defence to any grievance challenging the legitimacy of the layoff if they offered the person their job back! It would make more sense to simply settle out the grievance by reinstating them with back pay.

    And also, hiring them back simply puts them back within the purview of the collective agreement with all its protections so it would be a pretty useless strategy (especially if you are alleging cause, in which case how bad could their performance have been if you are bringing them back!) It’s probably something that could only exist in the labour context in a very theoretical sense, if at all.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>