The BC Court of Appeal in Allen v. Ainsworth Lumber Co. Ltd., 2013 BCCA 271 recently affirmed a trial judgement that found that an employee who was advised that he was relieved of his duties, and to "go home" while the employee paid him had been dismissed and was not required to mitigate his damages.
When he found work, during the 15 month period, at remuneration greater than that which he made in his former employment, his former employer ceased payments to him. He sued. The central issue was whether the employee was terminated when he was "relieved of his duties" or whether he was "constructively dismissed" and obliged to mitigate. The Court summarized the argument as follows:
[The employer] submits those findings cannot support a conclusion that its withdrawal of [the employee’s] duties on October 14, 2009 represented a clear and unequivocal termination of his employment contract that day. Instead, [the employer] says that letter placed [the employee] on working notice for 15 months. It accepts that the concurrent removal of his employment duties constituted a repudiation of his employment agreement, but says this alone did not terminate that agreement. The consequences of the repudiation depended on [the employee's] response to it. If he did not accept it, he could claim he was constructively dismissed and sue for wrongful dismissal in accord with the principles affirmed by the Supreme Court in Farber v. Royal Trust Co.,  1 S.C.R. 846
The Court of Appeal found that, in the circumstances, the employee was dismissed on October 14, 2009 when he was relieved of his duties, and that he was entitled to 15 months salary and benefits in lieu of notice.
The Court pointed out, and this comes from the trial judgment, that "the parties revised his employment contract to improve the severance provisions in his favour: in the event of termination without cause, [the employee] would receive either 15 months’ salary and benefits, or “pay in lieu”."
The Court of Appeal observed:
[The employee's] employment agreement did not impose a duty to mitigate, and the trial judge properly found he was therefore entitled to the balance owing for 15 months’ salary and benefits in lieu of notice as damages for breach of contract
This is consistent with the recent decision of the The Ontario Court of Appeal in Bowes v. Goss Power Products Ltd., (2012) ONCA 425 (CanLII).
The case is interesting and highlights the need for clarity at the point of termination and in employment contracts. While there are a great many reasons for relieving someone of their continued obligations to attend at work, it is important to deal with "what happens" if the employee secures employment during the severance period and not leave that to legal argument. Furthermore, careful drafting at the front end, at the time of hiring when good will is at its highest, can often avoid costly litigation. That said, in this case, as the trial judge pointed out, the amendment to the employment agreement described above, was negotiated in the context of "the company’s uncertain future and the consequent risk to [the employee's] continued employment", and that context is important on a practical level in understanding the contract.
Hat tip to Greg Gowe for alerting me to this case.