Mitigation: Demotion: Mifsud: Ontario Court of Appeal

On appeal, the court, apart from the mitigation issue, interestingly doubted the correctness of the finding of constructive dismissal. The reasoning was not based on the conclusion of a demotion, but rather on the argument that implicitly accompanying a promotion was an implied probationary term that the employer may return the employee with impunity back to the former position, given dissatisfaction with the performance.

Implying probationary terms to an appointment would be a fresh judicial step. The time to set out the terms of a promotion is surely when they are offered to the employee. The Ontario Divisional Court in 1986 ¹ had previously held that the imposition of a probationary term by the employer unilaterally was grounds for constructive dismissal. The same conclusion followed in the Nova Scotia Supreme Court which contains an excellent review of prior cases on this point. ³

The court in Mifsud continued to state given the finding of constructive dismissal, “it must be taken from this that he ⁴ implicitly rejected an implied term that MacMillan could demote Mr. Mifsud for what it considered to be inadequate performance”.

These words are difficult to comprehend. This issue was not argued before the trial judge. The trial judge did not address this issue. The court appears to be suggesting that an employer would have the implied right to demote based on its own view of inadequate work performance, not just cause, where the salary is the same. This is all before the mitigation issue is discussed.

Clearly the court had an issue on the constructive dismissal finding, which was neither accepted nor rejected: “It is not necessary in this case to reject the trial judge’s finding of constructive dismissal nor to consider the issue of just cause” due to the mitigation finding. It would have been preferable that the court had chosen to set aside the constructive dismissal finding, which would the expected sequential logical analysis.

Nonetheless the court determined that Mifsud should have accepted the alternative position as a mitigation obligation: ⁵

The fact that the transfer to a new position may constitute in law a constructive dismissal does not eliminate the obligation of the employee to look at the new position offered and evaluate it as a means of mitigating damages. In all cases, comparison should be made to the contractual entitlement of the employer to give reasonable notice and leave the employee in his current position while a search is made for alternative employment. Where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious (as in this case) it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until he finds acceptable employment elsewhere.

The court did send this life raft out to those in need:

It must be kept in mind, of course, that there are many situa­tions where the facts would substantiate a constructive dismissal but where it would be patently unreasonable to expect an employee to accept continuing employment with the same employer in mitigation of his damages.

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1. Buckle v Mother Parkers (1986), 11 C.C.E.L. 299 (Ont. Div. Ct)  as referenced in Chambers v Axia Netmedia

3. It is remarkable that the court would be considering this hypothetical argument for a person with 9 years history, clearly not a probationary period. The application of such a probationary term was, however, discarded by the court as inappropriate given the lengthy history in this position.

   The Court continued to note, given that Mifsud clearly was not within the realm of a hypothetical probationary period, that the question hence to be asked would be:

   The initial question is “Was there an implied term of the employment contract that if at any time the company validly considered Mr. Mifsud’s performance to be unsatisfactory it could, without his concurrence, demote him, as it did, to a position of lesser responsibility, but equal pay ?” I believe that had the parties asked this question at the time of Mr. Mifsud’s promotion to superintendent, they would have so agreed.

   It is evident that the company could demote or terminate for just cause at any time. That proposition requires no secret sauce. The court must have been referencing a lesser standard than just cause as we know it at common law to rationalize this theory, all of which is odd to say the least, but does betray a strong indicator of the court’s sympathies.

   This clearly obiter comment has attracted judicial criticism. Justice Lowry of the British Columbia Supreme Court made this statement on the above quoted passage in Peterson v Wilson Logistics and hit the nail quite squarely on the head:

   [11]        Further, with respect, I question whether such an agreement can always be implied.  I consider that, if it can be implied, it can only be where it can properly be said that the option to reassign the employee to his or her original or a similar position would have been agreed to had the parties considered it.  This would then turn on the nature of the promotion and the extent to which returning to a position similar to the position from which the employee was promoted would be humiliating for the employee.  I have difficulty accepting that, unless it is otherwise agreed, an employer may invariably reassign an employee who has been promoted if the employee proves not to be suitable for the new position.

   ² This passage in Mifsud was accepted as law, which it is not, as it is clearly obiter, in Murdock v 497123 Ontario by Stinson, J. of the Ontario Superior Court in March of 2005, although not applied in that instance
4. that is, the trial judge – ed
5. note the reference to the new position as “may constitute” , highlighting added– ed