Smithson: Sometimes it’s smart to go back after a layoff

Employers commonly fall into the trap of thinking they can lay off employees without any ramifications.

The weird world of employment law sometimes compels employees to go back to work for the very employer which fired them.

Recently, just such a case played out in the Ontario Superior Court.

A man named Chevalier had been employed by about 32 years when he was laid off from his employment by Active Tire & Auto Centre Inc.  He responded by suing for damages constructive dismissal.

That fact, alone, was not surprising. Employers commonly fall into the trap of thinking they can lay off employees without any ramifications.

The legal reality is just the opposite. Unless the employer has contractually reserved the right to impose unpaid layoffs, making such a change to the employee’s status will be viewed by the courts as a constructive dismissal.

This is an example of the general rule that when an employer unilaterally imposes substantive changes to an employment contract, the employee sometimes has the right to treat those changes as a termination. Such a “constructive” dismissal is every bit as real as if the employee were actually informed of the termination, and gives rise to the same right to claim damages in lieu of notice.

Not every imposed change, however, will amount to a constructive dismissal. The change must be one which is substantial and which goes to the heart of the employment relationship such as a transfer, demotion, substantial reduction in wages, or (as in Chevalier’s case) an unpaid layoff.

The twist in Chevalier’s circumstances was that his employer, upon realizing its error, wrote to him and asked him to return to work. It acknowledged to Chevalier that it had acted under the mistaken impression that it could lay him off and it apologized for its mistake.

This would have created a dilemma for Chevalier because an employee suing a former employer for damages for wrongful dismissal has a legal obligation to mitigate his or her losses. The employee can satisfy this duty by making reasonable efforts to find other employment (or to otherwise generate earnings to replace the lost wages).

This duty to mitigate also arises out of the law of contract—flowing from that body of law is the premise that the innocent victim of a contractual breach must take steps to reduce his losses.  In the employment context, this means the terminated employee must make attempts to return to employment.

So, individuals claiming damages for wrongful dismissal must make reasonably diligent efforts to find new employment. If they do not do so, this failure to mitigate will negatively impact their entitlement to damages (pay in lieu of notice).

Chevalier chose not to return to employment with Active Tire. He then spent the next 17 months unemployed.

And when he got to trial against Active Tire, the Court found he should have accepted its offer to return to work. The court determined that returning would not have exposed Chevalier to an atmosphere of hostility, embarrassment, or humiliation.

Chevalier had, according to the court, failed without justification to mitigate his losses. In doing so, he deprived himself of 16 months’ wages as damages because his action for constructive dismissal was dismissed.

These sorts of scenarios don’t arise all that often but, when they do, they can be very costly for the employee who refuses the employer’s overture to return. So, when you’re former employer says, “Y’all come back now”, give that invitation careful consideration.

Kelowna Capital News