Farwell v. Citair: “Insurmountable” Obstacle in Mitigation

June 4, 2014

In Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177, the Court of Appeal makes an important point with respect to the application of the principles of mitigation in a constructive dismissal case.

A 58 year old employee with 38 years of service was transferred from the position of Operations Manager Vice President of Operations to a Purchasing Manager. The position of Purchasing Manager was a position that he had held many years earlier and the transfer would have left him reporting to someone who had been his subordinate. His income would have remained almost the same however. The trial judge found that the employee had no obligation to accept the Purchasing Manager position given that, viewed subjectively, it would have been humiliating and embarrassing for him to take the position.

On appeal the employer argued that the trial judge had erred in viewing the obligation to mitigate subjectively, notwithstanding her correct self instruction that the test was objective. Importantly, however, the employer argued that the decision to transfer the employee was driven by economic considerations and not any attempt to stigmatize the employee. The Court of Appeal was sympathetic to the argument that an employee’s obligation to mitigate by remaining with his or her employer was an aspect of what, in law, is known as “efficient breach”. The Court of Appeal also recognized that there may have been merit in the employer’s argument that the court misdirected itself in taking a subjective approach to assessing, for the purposes of mitigation work atmosphere, stigma and loss of dignity. That said, the appeal was dismissed because of another obstacle which the court deemed “insurmountable”. The court stated:

To paraphrase Evans, the Appellant’s mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the Appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the Appellant that he was treating the reorganization as constructive and wrongful dismissal.

Farwell v. Citair, Inc. emphasizes the importance of an employer reiterating to the employee alleging constructive dismissal that a new position is available to him or her in mitigation.

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