Ontario Court Addresses Employee’s Duty to Mitigate After Employer’s Business is Sold 2019-08-30T14:34:52+00:00

It is well established that during the reasonable notice period, employees have a duty to mitigate their damages by seeking out and accepting alternate employment. The consequences of an employee’s failure to satisfy this duty can be severe. For example, a court may effectively reduce an employee’s reasonable notice period if he/she fails to take reasonable steps to attempt to find alternate employment. In a recent case, the court addressed the duty to mitigate and the consequences of an employee’s refusal to accept new positions with a company which had purchased part of their employer’s business.

In Dussault v Imperial Oil Limited, Donald Dussault and Maryann Pugliese worked in Imperial Oil’s retail store division. In March 2016, Imperial advised its employees that it had reached a conditional agreement to sell its retail business to Mac’s Convenience. Dussault and Pugliese were later informed that they would be offered employment with Mac’s and that if they did not accept Mac’s employment offers, their entitlement to severance pay would be substantially reduced or eliminated to reflect the fact that they “passed up an opportunity for continued employment with Mac’s”.

Over the next few months, Dussault and Pugliese attempted to get additional information about the transaction between Imperial and Mac’s, and the impact it would have on their employment, however, neither Imperial nor Mac’s responded to their requests for information. In particular, while they were advised that Mac’s was committed to continue paying the same base salary paid by Imperial for an 18-month period, Mac’s would not disclose the salary they would be paid after 18 months. Consequently, Dussault and Pugliese refused to sign the new offers of employment with Mac’s and, as a result, their employment was terminated. Following their termination, Dussault and Pugliese brought a claim against Imperial for wrongful dismissal.

The Court found that it was not reasonable for Dussault and Pugliese to be required to mitigate their damages by accepting offers of employment with Mac’s. In particular, the Court noted that the Mac’s offer was presented to Dussault and Pugliese before their employment with Imperial was terminated and that neither Mac’s nor Imperial approached Dussault and Pugliese after they had been terminated offering them an opportunity to work for Mac’s. Secondly, the Court found that because Imperial required Dussault and Pugliese to sign a release renouncing their right to sue Imperial for any shortfall in their entitlement to wrongful dismissal damages, it was reasonable for Dussault and Pugliese not to accept the Mac’s offer.  Finally, the Court found that while there were many aspects of the Mac’s offer that were comparable, there were sufficient differences to make the rejection of the offer reasonable. In particular, the Court noted that while Mac’s was committed to continue paying the same base salary paid by Imperial for an 18-month period, Mac’s would not tell them what their salary was to be after 18 months. Accordingly, Dussault and Pugliese were awarded 26 months of reasonable notice.

This case is an important reminder on how the duty to mitigate can significantly impact an employer’s liability for severance when purchasing or selling a business. As this case illustrates, a court will not necessarily reduce an employee’s damages for wrongful dismissal for failure to accept offers of employment from the purchaser. Consequently, employers should always get legal advice on how to structure a purchase and sale of their business to minimize the risk of having to pay substantial amounts for severance to former employees.