Alternative Offer of Employment Must be Objectively Reasonable

March 20, 2017

In Evans v. Paradigm Capital Inc., Justice Gans of the Ontario Superior Court of Justice addressed a senior executive’s duty to mitigate following her constructive dismissal, and specifically whether she was required to accept an alternative position from the employer to mitigate her damages.

The Employee was hired by the Employer, an institutional investment dealer, in 2004 as an equity salesperson. The Employee earned a significant compensation package with the Employer, which included a base salary, participation in a quarterly bonus pool, and shareholder rights. In 2006 the Employee demonstrated her commitment when she continued to work after she was diagnosed with cancer, through her treatments and recovery.

In early 2009 the Employer decided to ‘recast’ the Employee’s job in the form of a new position. Under the revised position, she would have fewer large institutional clients, and manage a retail account base which would require her to obtain a retail broker’s license. The Employee would have a higher fixed base salary, but a reduced ownership interest in the Employer, and participation in an inferior bonus program. In the alternative to accepting the revised role, the Employee was offered a termination package.

The Employee refused the offer, and sued for wrongful dismissal. At trial, there was no dispute that the revised job offer to the Employee amounted to a constructive dismissal. The main issue was whether the Employee’s refusal to take on the revised role amounted to a failure to mitigate her damages. The Employer took the position that the Employee acted unreasonably in not accepting the revised role even on a temporary ‘wait and see’ basis while searching for new employment.

The Court was not persuaded of the Employer’s position, and held that the Employee was not obliged to accept the revised offer as part of the mitigation process. First, a number of the tangible aspects of the revised position, including compensation, were ill-defined and the position offered amounted to one of form, not substance. Second, the non-tangible elements associated with the revised position – atmosphere, stigma, loss of dignity – supported the conclusion that the Employee was not obliged to accept the job. The judge stated: “in my view, such a move would be akin to moving a heretofore starting pitcher to the bullpen while asking him to be the set-up man for the ‘hot-shot’ closer.”

The Court underscored that the onus is on the employer to prove that an alternative offer of employment is objectively reasonable in the circumstances, which the Employer failed to discharge in this case.

Evans v. Paradigm Capital Inc., 2016 ONSC 4268 (CanLII)

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