August 8, 2014
The Employee was a Manager/Vice President of Operations with thirty eight years of employment tenure with the Employer. The Employer decided to unilaterally change the employee’s position from Vice President of Operations to a Purchasing Manager. The Employee declined to accept this new position. He took the position that he had been constructively dismissed by the Employer’s attempt to fundamentally change the terms and conditions of the employment agreement by offering a position of lesser status, prestige, and responsibility.
The trial judge held that the Employee was constructively dismissed because the change in positions with the company constituted a demotion which fundamentally altered the employment contract. In applying the test established by the Supreme Court of Canada in Evans v. Teamsters, the trial judge held that the Employee did not have a duty to mitigate his damages by working throughout the notice period in a lesser position as a purchasing manager. This new position would have been humiliating and embarrassing since it required the Employee to report to an individual that was previously the Employee’s subordinate.
The Court of Appeal upheld the trial judge’s decision. As a general principle, in the absence of a hostile or embarrassing work environment, the Court recognized that an employee’s obligation to mitigate his or her damages by agreeing to work for an employer during the notice period, which is referred to as an “efficient breach” of contract, ought not to be discouraged.
However, in this case, even if the Court did find that there was no embarrassment or humiliation which presented a barrier to reinstatement, the Employer fatally omitted to extend an offer to reinstate the Employee in the position of a Purchasing Manager after he was constructively dismissed. In the absence of an offer of reinstatement, it could not be found that the Employee failed to mitigate his damages.
Accordingly, to properly reinstate an employee following termination, or implement an “efficient breach” of contract, an employer must formally extend such offer, ideally in writing, to assert the position at trial that an employee did not mitigate his or her damages by failing to work during the notice period.