In Fillmore v Hercules SLR Inc., the Court of Appeal for Ontario determined that a terminated employee does not have to mitigate his damages upon termination by returning to work for the same employer in a new full time position at less compensation.
In this case, the employee, Roy Fillmore, was terminated by his employer, Hercules SLR Inc., and commenced an action seeking damages for wrongful dismissal. At the time of his termination, Mr. Fillmore was 51 years old and had been employed for 19 years with the employer. The lower court judge held that, although his position of Director of Purchasing was not a “classic managerial position”, he was nonetheless senior and specialised as he was the only Director of Purchasing for the employer in Ontario.
There was no employment contract between the parties. Upon termination, the employer sent a letter to the employee stating that he would receive eight weeks’ written notice in accordance with the requirements of the Employment Standards Act, 2000 (ESA), and offered him an additional payment of 12 weeks’ pay in exchange for executing and returning a Full and Final Release.
The employee also received a second letter from the employer offering him a full time position of Supervisor Service. The salary for this new position would be $60,000.00 per annum (more than 20 % less than his former salary). The employer’s offer further provided the employee with a six month income guarantee at his old salary. The employee did not accept either offer by the deadline.
The lower court judge determined that an employer must offer an employee a “clear opportunity to work out the notice period” after the employee refuses to accept the new, lesser position. In other words, had the employee accepted such an offer from a third party employer, he would still be able to seek compensation from the employer for the difference between his new salary and his old salary during the notice period.
The lower court judge concluded that the new offer of employment was not an offer to work through the notice period. Instead, it was simply an offer for a new full time position at much less compensation. There was nothing in the second letter which confirmed that the potential acceptance of the new offer of employment would be without prejudice to the employee’s rights arising from the dismissal from his former position. There was no obligation on the employee to effectively risk handing the employer a Full and Final Release “through the back door” and under the guise of mitigation efforts.
Accordingly, the employee did not fail to discharge his duty to mitigate. He was therefore entitled to payment of reasonable notice in the amount of 17 months in light of his age, length of service and position.
The employer appealed the decision and the Court of Appeal agreed with the lower court judge. It further held that where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity.
On the facts of this case, a reasonable person in the employee’s position was not obliged to accept a term risking waiver of the wrongful dismissal claim.
For employers seeking to limit their liability upon termination, this decision clarifies issues regarding mitigation. If an employer offers an employee a chance to mitigate damages by returning to work, to trigger this form of mitigation duty, the employer is obliged to offer the employee the clear opportunity to work out the notice period after the employee refuses to accept the new position.