Comparable Offers - Failure to Mitigate
This was a February 2008 decision of Justice Bruce of the British Columbia Supreme Court in which there was a finding of failure to mitigate by not accepting an alternate offer of employment. Within two months of his termination, the plaintiff was offered employment from two companies which offered comparable salary, benefits, duties and responsibilities, none of these facts being denied by the plaintiff. The plaintiff chose to reject these offers as he had chosen to commence a new career as a real estate agent by the end of September 2007 and had rejected the alternate offers in early November 2007. The plaintiff acknowledged that “he may not see a steady income for many years”.
One argument advanced by the plaintiff was that the shabby treatment afforded to him by his employer on termination he was gun shy to take the risk of being possibly subject to the whims of a new employer in a similar manner. A failure to mitigate was found and the claim was dismissed.
Income Reduction of 32% - Failure to Mitigate
This case is later reviewed in the context of a constructive dismissal and mitigation. It has had a considerable judicial history, which may not be relevant to the final analysis, but nonetheless it is set out here in some detail.
The motions judge initially determined that there was a failure to mitigate by declining a specific alternate offer from a second employer for new employment. This decision was set aside by the Court of Appeal and was then returned to the motions judge who re-assessed the evidence and again came to the same conclusion.
The plaintiff worked closely with TD Bank as part of the PCAC Alliance. He had also previously worked with TD Bank. Following his termination, TD Bank offered to the plaintiff a position as national sales manager with the same base salary of $102,140 together with the ability to earn up to 80% base salary as incentive compensation and recognition of past service for pension and vacation and a signing bonus of $9,221. “Most importantly, the plaintiff would receive from the TD Bank the technological backing that he complained had been taken away from him with the demise of the PCAC Alliance.”
The maximum compensation he could earn with this offer was $182,852. He was to be paid commissions only on group and bank results and not on his direct sales. The maximum compensation offered was very close to his three year average with the defendant of $184,662.
The Bank did not match the long-term cash award bonus scheme offered by the defendant (the amount is not referenced –ed) but it did offer employee stock options and a signing bonus, as was incorrectly found on the first hearing and later amended.
The type of work to be done in the offer was the same as done previously. It was noted that 70 of the 85 PCAC Alliance employees were hired by the TD Bank, including the plaintiff’s two supervisors.
This was found to be a failure to mitigate and the plaintiff’s claim was denied.
The plaintiff’s appeal to the BC Court of Appeal was successful in February of 2011, as the trial judge had misstated the evidence with respect to the compensation offered by the TD Bank to the plaintiff. The trial judge had erred by comparing the plaintiff’s average earnings over a four year period (incorrectly stated as three) against his maximum earnings at the proposed position, had also stated that he was offered stock options as opposed to the chance to buy stock at favourable prices and that he had been offered a signing bonus which was in fact a retention bonus. The appeal was allowed and returned back for a new hearing on this issue.
The case came again before Justice Kloegman who gave reasons in July of 2011. The evidence showed that the sales cycle on which commissions were based was as long as 18 months. The efforts of the plaintiff in effecting sales were not necessarily represented in income for the given year. For this reason his prior income varied dramatically from year to year and hence an averaging concept was fairly used to determine annual compensation on a two year basis. Hence the average income from the defendant for the assessed notice period of 8 months was $152,742, inclusive of all income components.
One component of the offer from the TD Bank was a commission, which was guaranteed at $25,000 for the first year, but gave an ability to earn up to 80% of base salary of $102,140. The plaintiff had deposed that his total earnings, including commission, would likely have been $150,000 annually, which number was used for the purpose of this analysis.
On this instance the court concluded that the TD offer was $50,000 less for the notice period of 8 months (i.e., not annually but absolutely) and was considered to be close “not a significant enough disparity in dollars to outweigh the other considerations that made the TD offer seem a reasonable form of mitigation”.
The arguments for not accepting this offer, such being the loss of the title of director of sales and the inability to earn unlimited commissions were seen as not sufficient to decline the offer.
The court also used a contextual analysis by looking at the lack of possible comparative offers. The plaintiff had testified that the remaining two to three potential employers in a small industry were unlikely to hire him and that he had spoken to the fifth which had no available position. He had made no other efforts to find employment.
The finding of a failure to mitigate was upheld.
This seems like a harsh conclusion. The annual disparity in income was $75,000 or expressed as a percentage of his prior annual income used for the analysis of $229,113, was a reduction of 32%.