The purpose of severance is to bridge the gap while a person is unemployed and looking for a new job. As we often tell clients, severance is not intended to provide a windfall. When a person is dismissed from a job, they have an obligation to make reasonable efforts to offset the losses stemming from their dismissal (referred to as the “duty to mitigate”). In the right circumstances, this may include accepting an alternate offer of employment with the same employer or pursuing a reasonable opportunity that has been brought to their attention.
The key is that workers are expected to act reasonably – looking for, and accepting, comparable offers of new employment (taking into consideration skill set, location, and rate of compensation). A failure to meet this requirement may result in the worker’s entitlement to severance being reduced or, in extreme circumstances, lost entirely (on the basis that they unreasonably allowed their losses to accrue). This is a basic tenet of contract law and one that Ontario employers should keep in mind.
A Practical Example
A recent decision from the Ontario Superior Court of Justice, Gannon v. Kinsdale Carriers, 2024 ONSC 1060 (“Kinsdale”) offers a helpful guide for employers in responding to a claim for wrongful dismissal, and options that may be available to help reduce liability exposure.
In Kinsdale, the plaintiff asserted wrongful dismissal and sought damages equal to 22 months’ pay and benefits. The plaintiff had been employed with Kinsdale for over 22 years. At the time of termination, she worked as an Accounts Receivable/Dispatcher/Office Clerk and was 57 years old.
The COVID-19 pandemic hit Kinsdale’s business hard and, as a result, on December 16, 2020, it informed all staff (including the plaintiff) that the business would close on December 31.
Kinsdale’s owner made proactive efforts to assist its affected employees, including the plaintiff, in finding new work. Her efforts in this regard included contacting a similar business, Zehr Transport (“Zehr”), and putting the plaintiff in contact with its ownership.
The court found that plaintiff met with Zehr representatives during December 2020. Based on the evidence before the court, Zehr offered the plaintiff a dispatcher position (which would have also included some administrative and other office duties) at the same rate of pay and hours of work as she enjoyed with Kinsdale.
The plaintiff declined Zehr’s offer of employment. She asserted that, as a full-time dispatcher role, it was not comparable to her position with Kinsdale. Instead, the plaintiff elected to see what else may be available and to pursue online courses.
The court concluded that the plaintiff’s decision to reject Zehr’s offer of employment reflected a failure to mitigate. The court determined that the proposed role was comparable and would have allowed the plaintiff to transition seamlessly from Kinsdale to Zehr with no, or a minimal, break in employment.
In reaching this conclusion, the court found that the Kinsdale owner “went out of her way to find suitable employment for her employees. What comes to mind is the adage, ‘no good deed goes unpunished’.”
As a result of the plaintiff’s failure to mitigate, the court found she had no entitlement to damages. To make matters worse, the court ordered the plaintiff to pay a portion of Kinsdale’s legal costs in defending the action (which included a 3-day trial and would likely have been tens of thousands of dollars).
Kinsdale is thus a useful reminder that individuals should carefully consider new offers of employment. Failing to accept a reasonable proposal may be a failure to mitigate and result in no entitlement to damages. This assessment can be complex. It is advisable to seek guidance from an experienced employment lawyer.
As for Ontario employers, Kinsdale serves as guide to the steps to take when dismissing an employee. Where possible, try to help individuals by making them aware of possible comparable employment opportunities. These actions may be both appreciated and, in the event an individual elects to commence legal action for alleged unpaid severance amounts, offer a strategic advantage in responding to the claim.
Vey Willetts LLP is an Ottawa-based employment and labour law firm that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in Ottawa and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca.