{"id":33881,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/working-out-mitigation-some-recent-issues-in-the-form-of.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"working-out-mitigation-some-recent-issues-in-the-form-of","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/human-resources\/working-out-mitigation-some-recent-issues-in-the-form-of.html","title":{"rendered":"Working Out Mitigation: Some recent issues in the form of reasonable notice and the duty to mitigate"},"content":{"rendered":"
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n\n

INTRODUCTION<\/font><\/span><\/b><\/p>

In dealing with the dismissal of any employee, both the employee and the employer must negotiate a host of legal minefields. <\/font><\/span><\/p>

Two central concerns in navigating the end of the employment relationship are the employer’s duty to provide reasonable notice and the employee’s duty to mitigate the loss of his or her position.<\/font><\/span><\/p>

Often, to encourage an efficient termination of the employment relationship, an employer will prefer to provide payment in lieu of notice rather than have an employee work out the period of notice.  However, sometimes – especially where an employee is senior and\/or possesses expertise necessary to the completion of a specific task – the employer may instead require the employee to work out the period of reasonable notice.  If the employer decides to require the employee to work out the notice period, and the employee consequently is unable to actively look for new employment, does the employee have any recourse? Can an employer be required<\/i> to provide payment in lieu of reasonable notice instead of working notice?  A case of the New Brunswick Court of Appeal had suggested an affirmative answer,<\/font>[1]<\/font><\/span><\/span><\/span><\/a> but recently, the Ontario Court of Appeal made some significant comments about the form of reasonable notice.  In Taylor v. Brown<\/i>, the Court opined on whether payment in lieu of reasonable notice was functionally equivalent in law to working notice.<\/font>[2]<\/font><\/span><\/span><\/span><\/a>  The Court determined that both forms of notice were legally equal and equally valid.  The Court of Appeal’s discussion, although not directly on point, may limit or foreclose the potential for employees to object to the employer’s decision to give them working notice rather than payment in lieu of notice.<\/font><\/span><\/p>

A separate but related issue to that of working notice is the employer’s option to offer an employee who is being removed from a specific position an alternate position.  Is an employee required to mitigate by accepting an alternate position with her employer, even where she considers the new position a demotion and thus legally constructive dismissal?  Mifsud v. MacMillan Bathurst Inc<\/i>.<\/font>[3]<\/font><\/span><\/span><\/span><\/a> remains the leading case in the area, standing for the proposition that an employee may be required to mitigate by accepting an alternate position with the employer, even where – in some circumstances – the new position is a demotion.   However, Mifsud<\/i> has been heavily distinguished, leaving the question of when an employee must accept a position which is arguably a demotion unsettled.<\/font><\/span><\/p>

WORKING NOTICE VS. NOTICE IN LIEU<\/span><\/b><\/font><\/p>

Overview<\/span><\/b>Generally, working notice and payment in lieu of notice are not considered to be functionally different, despite the fact that finding alternate employment may be made more difficult by a period of working notice.<\/i> Therefore, working notice will normally be considered part of the notice period.<\/span><\/font><\/p>

A few cases have stated that working notice will not be considered as part of the notice period where there was no opportunity for the dismissed employee to seek alternate employment during the working notice period. In light of Taylor<\/i><\/st1:city>, it is arguable that these cases would apply in Ontario<\/st1:place><\/st1:state>.<\/font><\/span><\/p>

General Principle<\/font><\/span><\/b><\/p>

Generally, working notice and payment in lieu of notice are treated as equivalent.  It is up to the employer, not the employee, to decide whether an employee works through the notice period or is paid in lieu.<\/font>[4]<\/font><\/span><\/span><\/span><\/a>  Most judges agree that an employee who has been given notice does not have the right to withdraw her services and demand pay in lieu instead.<\/font>[5]<\/font><\/span><\/span><\/span><\/a> <\/font><\/span><\/p>

The Ontario Court of Appeal has determined that there is no functional difference in law between the two forms of notice warranting the provision of a shorter notice period when providing a payment in lieu of notice as opposed to working notice of termination. In Taylor<\/i>, the Court of Appeal determined that the trial judge erred in concluding that the initial offer of 18 months working notice (which was subsequently revoked and replaced with an offer of six months in lieu of notice) was reasonable, but then in ordering only 12 months payment in lieu.  In the result, the Court of Appeal awarded the appellant 18 months notice in lieu. <\/font><\/span><\/p>

The Court stated that:<\/font><\/span><\/p>

While the purpose of the notice period is to provide time for employees to find alternate employment, a task made more difficult while the employee undertakes to fulfill the terms of working notice, we are of the view that there is no functional difference at law between working notice and payment in lieu of notice . . .<\/span><\/b><\/font><\/p>

Proper notice of termination is an implied term of the contract of employment; payment in lieu of notice is not.<\/span><\/b>  We agree with the opinion of Lambert J.A. in Dunlop v. British Columbia Hydro and Power Authority (1988), 32 B.C.L.R. (2d) 334 (C.A.), when he states at pp. 338-39 that payment in lieu of notice is seen as “an attempt to compensate for [the employer’s] breach of the contract of employment, not as an attempt to comply with an implied term of the contract of employment.”  The quantum of a payment in lieu of notice, therefore, is not calculated in accordance with the terms of the contract, but rather is a means by which an employer may terminate an employee contrary to its common law duty to give reasonable notice of termination, without incurring any liability.<\/span><\/font><\/p>

This position is supported by the wording of the Employment Standards Act . . . the Act authorizes the provision of pay in lieu of notice in the amount that would have been earned if proper working notice had been provided.<\/font>[6]<\/font><\/span><\/span><\/span><\/a><\/span><\/p>

Taylor<\/span><\/i><\/st1:place><\/st1:city> did not address a situation in which working notice was paid and the employee was actually unable to look for work. There may consequently be some room to distinguish Taylor<\/i><\/st1:place><\/st1:city> on the facts in a case where an employee was required to work out her notice of termination and consequently was unable to seek new employment.<\/span><\/font><\/p>

The principle is nonetheless clear.  Working notice will generally be credited to the employer in determining the period of reasonable notice owing.<\/font>[7]<\/font><\/span><\/span><\/span><\/a> As suggested in Taylor<\/i><\/st1:place><\/st1:city> ,<\/i> working notice will be considered as part of the notice period, despite the fact that working notice may make finding alternate employment more difficult. <\/font><\/span><\/p>

Possible Exceptions<\/font><\/span><\/b><\/p>

However, a few cases have suggested exceptions to the parity between working notice and notice in lieu where: i) it was not reasonable in the circumstances to have provided working notice rather than notice in lieu; or ii) the working notice did not allow the employee to seek alternate employment.<\/font><\/span><\/p>

i)<\/span><\/b>    it was not reasonable in the circumstances to provide working notice rather than notice in lieu<\/b><\/span><\/font><\/p>

In Ahmad v. Procter & Gamble Inc<\/i>., the Ontario High Court of Justice concluded that the employee was entitled to be paid for a three month notice period during which he was expected to continue working but, upon legal advice, chose to consider his employment contract repudiated.<\/font>[8]<\/font><\/span><\/span><\/span><\/a>  The court held that, in light of the significant forewarning (not actual notice) of the end of his position, the employee should have been looking for other employment and a shorter notice period was warranted.  However, with regard to the period of working notice, the court stated that:<\/font><\/span><\/p>

The company clearly wished Mr. Ahmad to continue working in these months and to co-operate in setting up the system which was to be responsible for his termination.  Whatever the technical aspect might be to this, it was, in my view, asking too much to expect Mr. Ahmad to continue working through the notice period.<\/font>[9]<\/font><\/span><\/span><\/span><\/a> <\/font><\/span><\/p>

Ahmad<\/span><\/i> may create some room for the payment of notice in lieu in a case where an employee, considering the employment contract repudiated, refused to work out the notice period.  However, even if logic of Ahmad<\/i> were followed, it likely would not apply where the employee did in fact work out the notice period, such that payment was made for the period of working notice. <\/span><\/font><\/p>

the working notice did not allow the employee to seek alternate employment<\/font><\/span><\/b><\/p>

The high water mark of this exception is Bramble v. Medis Health and Pharmaceutical Services Inc.,<\/i> in which the New Brunswick Court of Appeal refused to credit the employer with the 15 weeks’ working notice it provided the respondents.<\/font>[10]<\/font><\/span><\/span><\/span><\/a>  The Court stated that to do so would permit formalism to triumph over substance.  The Court of Appeal held that:p<\/font><\/span><\/p>

The trial judge’s finding of fact, with respect to the working notice’s practical value, is unequivocal and clear: the respondents “could not actively seek work during the working notice period”…That being so, the portion of the overall notice periods spanning the working notice is, for all intents and purposes, illusory . . .<\/font><\/span><\/p>

The primary objective of notice is to provide the dismissed employee with a fair opportunity to obtain similar or comparable employment.<\/span><\/b>  It follows that the weight to be given to a particular working notice will vary depending on the quality of the opportunity it gives the employee to seek an alternate position.<\/b>  In this particular case, the trial judge’s finding of fact that the respondents could not actively seek work during the working notice period deprives the latter of any legal value.  As a result, no weight can legitimately be attached to it.[11]<\/span><\/span><\/span><\/a> <\/span><\/font><\/p>

Bramble v. Medis Health<\/span><\/i> was cited and applied with respect to its discussion of working notice in Holmes v. Irving Shipbuilding Inc<\/i>.,[12]<\/span><\/span><\/span><\/a> although in that case the court held that the working notice should be deducted from the notice period because the employee was provided with reasonable opportunity to seek alternate employment through access to human resources services and a fax machine. <\/span><\/font><\/p>

Bramble v. Medis Health<\/span><\/i> also referenced the decision in Norrad v. LaHave Equipment Ltd.<\/i>, in which the court determined that four weeks working notice was not notice where the employee was expected to report to work to complete the odds and ends of the sale.[13]<\/span><\/span><\/span><\/a> <\/span><\/font><\/p>

There do not appear to be any Ontario<\/st1:place><\/st1:state> cases in which Bramble v. Medis Health<\/i> was expressly followed or rejected on this point or in which a similar exception was applied. However, a couple of Ontario<\/st1:place><\/st1:state> cases have referred to the opportunity to seek alternate employment during working notice as a potentially relevant factor. <\/font><\/span><\/p>

In Kontopidis v. Coventry Lane Automobiles Ltd.<\/i>, the court, in determining that four months was a reasonable working notice period and that the manner of dismissal was not in bad faith, noted that the employer gave the employee “the opportunity to search for employment during the notice period”.<\/font>[14]<\/font><\/span><\/span><\/span><\/a> <\/font><\/span><\/p>

In Cowper v. Atomic Energy of Canada Ltd<\/i>., the court concluded that the appropriate notice period in the circumstances was 27 months.  In so concluding, the court stated that:<\/font><\/span><\/p>

In arriving at this conclusion, I have taken into consideration the factors I have already referred to along with the fact the plaintiff had three months of working notice, at which time he had very little time to search for new employment, as he was assigned to complete a project in China.<\/font>[15]<\/font><\/span><\/span><\/span><\/a> <\/font><\/span><\/p>

Despite the reference to the lack of opportunity to seek employment during the three month working notice period, the court ordered the three months of working notice to be deducted from the 27 months of notice awarded. <\/font><\/span><\/p>

In the result, it does not appear likely that, in Ontario, Bramble v. Medis<\/i> creates an exception to the principle expressed in Taylor<\/i>, i.e., that working notice constitutes notice despite the fact that it may make seeking alternate employment more difficult.  However – since Taylor<\/i><\/st1:place><\/st1:city> did not address whether the practical inability<\/i> to search for work is relevant in considering working notice – there may be an arguable case that the logic of Bramble v. Medis<\/i> properly applies. <\/font><\/span><\/p>

A DUTY TO MITIGATE BY DEMOTION? AN UPDATE ON MIFSUD<\/i><\/font><\/span><\/b><\/p>

Overview<\/span><\/b>Mifsud, supra<\/span><\/i>, is still the leading case on the duty to mitigate by accepting an alternate position with the employer. In Misfud,<\/i> an employee was required to take a position which the court conceded was a demotion, albeit at the same salary.<\/span><\/font><\/p>

According to Mifsud<\/i>, an employee who has been constructively dismissed may be reasonably required to mitigate by taking an alternative position with the employer where:<\/font><\/span><\/p>