The Debate over Mitigated Damages: Evans v Teamsters Local Union

Unions – stalwart defenders of workers’ rights that they are – seldom find themselves defendants in wrongful dismissal matters, much less defendants in front of the Supreme Court of Canada. Nevertheless, the Yukon-based Local 31 of the International Brotherhood of Teamsters will have that dubious distinction when Canada’s highest court hears Evans v Teamsters Local Union No 31, 2006 YKCA 14 [Evans], this January.

Background

Evans stems from a wrongful dismissal action brought by Donald Evans, who had been employed as a business agent with the Teamsters Union’s Whitehorse office. Mr. Evans was dismissed on January 2, 2003, following a heated election campaign in which he had been an outspoken supporter of the defeated incumbent Union President. Upon assuming power, Mr. Hennessy, the incoming president, consulted his legal counsel as to the nature of his obligations vis a vis continuing to employ Mr. Evans. He was apprised of the possible legal argument, (pursuant to Section 13 of the union’s bylaws), that Mr. Evans was a “fixed term” employee, and as such subject to dismissal upon the arrival of a new executive.

In spite of this possibility, Mr. McGrady, counsel for Mr. Henessy, likely bearing in mind Mr. Evans’ 23 years of unbroken employment with the union, cautioned that a court would most likely find that Mr. Evans was an “indefinite term employee.” The implication of this, Mr. McGrady explained, was that the union’s severance pay plan was “not a substitute for the union’s obligation to provide working notice or pay in lieu of notice.” With this in mind, Mr. McGrady recommended including the following provision in his letter of termination to Mr. Evans:

Our expectation is that you will remain in your current position receiving your current wages and benefits during the period of working notice. We should also point out that we expect that you will perform your duties in the normal course during this period.

It appears that Mr. Hennessy ignored the advice of his counsel. On January 2, 2003, he faxed a letter to Mr. Evans advising that, pursuant to bylaw 13, his employment as business agent had been terminated. Interestingly, Mr. Evans also received a copy of Mr. McGrady’s legal opinion, including the portion quoted above, forwarded to him courtesy of the outgoing union president.

What ensued was a series of negotiations between the two parties as to the terms of Mr. Evans’ termination, during which time the union continued to pay Mr. Evans. However, the negotiations reached an impasse in May of 2003. In an effort to resolve the matter short of legal action, on May 23, 2003, the union offered Mr. Evans the option of returning to work for the period between June 1, 2003 and December 31, 2004, which, the union explained, would constitute sufficient working notice of termination. Mr. Evans rejected the offer, agreeing to return to work only if the union agreed to rescind its letter of termination.

Yukon Supreme Court Decision

When the matter proceeded to trial, the union, citing the above letter, alleged that Mr. Evans had failed to mitigate his loss by declining to return to work. Gower J. of the Yukon Territory Supreme Court rejected this argument, and awarded Mr. Evans $100,008.79 in damages. In dismissing the union’s argument that Mr. Evans had failed to mitigate damages, Gower J. drew on Brazeau v International Brotherhood of Electrical Workers, 2004 BCCA 645, which held that the burden for establishing a failure to mitigate damages by returning to work rests with the defendant. To this end, Gower J., despite admitting that he was not “particularly impressed by the efforts of Mr. Evans to obtain alternate employment,” concluded that the union had failed to meet “the ‘relatively high standard of proof’.” He also reasoned that it was highly unlikely that Mr. Evans “would have found comparable alternative employment in the Yukon.”

Furthermore, Gower J. rejected the union’s claim that it was “completely unreasonable” for Mr. Evans to decline its offer to return to work on June 2, 2003. In reaching this conclusion, he focused primarily on the union’s letter of May 23, 2003, characterizing it not as an invitation to return to his old employment or alternatively as a new offer of employment, but as a demand by the union. After reviewing the common law, Gower J. concluded that “that it appears that it is truly the rare case when wrongfully dismissed employees will be considered in breach of their duty to mitigate their damages by failing to return to the employment from which they had been dismissed.” He accordingly found that Mr. Evans had not breached his duty to mitigate by failing to return to the Union office following his termination.

Yukon Territory Court of Appeal

The decision of the trial court was reversed by Thackray J.A., writing for a unanimous Yukon Territory Court of Appeal. Thackray J.A. took issue with Gower J.’s characterization of the May 23, 2003 letter as a demand. Instead, he reasoned that the letter “must be read as saying that if Mr. Evans returns to the job he will have it subject to the 24 months notice from January 2, 2003 to December 31, 2004.” With this in mind, Thackray J.A. characterized the letter as a job offer, although admitted that Mr. Evans, had he accepted the offer, “would be working in a politically charged environment under the ticking clock of a two-year notice period.”

Thackray J.A. then turned his attention to whether or not Mr. Evans’ failure to return to work was unreasonable. Whereas Gower J. had found that Mr. Evans’ willingness to return to his previous post as an “indefinite term” employee, constituted a “reasonable expectation” for his part, Thackray J.A. took issue with Mr. Evans’ insistence on remaining an “indefinite term” employee. “Such a rescission” he explained, “would have opened up to Mr. Evans the opportunity, which he clearly had in mind, to extend his “notice” to 29 months, an extension which Mr. Evans knew was unacceptable to the union.”

Thackray J.A. then proceeded to take apart Justice Gower’s characterization that a terminated employee must only “rarely” return to his place of employment in order to mitigate damages. Relying on Smith v Aker Kvaerner Canada Inc and Kvaerner Power Inc, 2005 BCSC 117, he found that “an employee is required to take such steps as a reasonable person would take in the circumstances.” In applying this objective test, Thackray J.A., (having concluded that Mr. Evans genuinely believed that the union’s May 23 letter constituted a bona fide offer of employment), found that it was unreasonable for him to refuse that offer. He accordingly set aside the damages awarded to Mr. Evans.

Commentary

At bottom, Gower J. and Thackray J.A. seem to differ on the nature of the conditions under which a terminated employee is obliged to return to his or her workplace to mitigate the damages of a wrongful dismissal. Gower J. appears to have been swayed by the holding in Farquhar v Butler Brothers Supplies (1988), 23 BCLR (2d) 89, that “very often the relationship [between employer and terminated employee] will have become so frayed that a reasonable person would not expect both sides to work together in harmony.” As a result, he seems more inclined to find that a terminated employee need not enter into such a relationship in order to demonstrate due diligence in mitigating the damages arising from a wrongful dismissal.

Thackray J.A. by contrast, seems to agree with the holding in Mifsud v MacMillan Bathurst Inc (1989), 70 OR (2d) 701, stating that “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 … it is reasonable to expect employees to accept the position offered in mitigation of damages…” In contrast to his colleague in the trial court then, Thackray J.A. seems more willing to give employers the benefit of the doubt when it appears that working conditions are roughly the same as they were prior to the dismissal.

For policy reasons, I am inclined to favour Gower J.’s approach. Even in the context of a good faith offer by an employer, the idea of requiring a wrongfully dismissed employee to resume working at his or her former place of employment to mitigate the damages arising from their wrongful dismissal seems unreasonable. Such an employee, especially if his or her intent to sue is anticipated, is more likely to be met with hostility by both their employer and colleagues alike.