Superior Court Determines That a Failure To Accept An Offer Of Re-Employment By An Acquiring Company Is Not a Failure To Mitigate

In the case of LG Electronics Canada Inc., 2023 ONSC 5476 (CanLII), <https://canlii.ca/t/k0q5n>, a 49-year-old warehouse worker with over 13 years of service did not fail to mitigate their losses when they refused an offer of re-employment by an acquiring company. The Plaintiff was awarded 12 months’ notice.

Background

The Plaintiff began employment with LG Electronics Canada (“LG”) as a warehouse packer in 2006. Under their employment agreement with LG, the Plaintiff was entitled to group medical benefits, six days per year of paid sick leave, and a 5% bonus based on individual and company performance. The Plaintiff was paid $44,250.48 per year. The Plaintiff’s performance reviews were positive, and there were no performance issues.

LG announced its intention to outsource warehouse operations to a third party, Pantos, in January 2021. At this meeting, the Plaintiff was told that their job duties, compensation, and seniority would remain the same with Pantos. However, when presented with a written employment contract, the Plaintiff was offered “at-will employment” and a significant reduction in the Plaintiff’s total compensation. This included out-of-pocket expenses for group benefits and no paid sick days. In response to the Plaintiff’s concerns, Pantos adjusted their offer to increase the base salary to account for the lost paid sick days and for a delay in the merit increase the plaintiff would have been due at LG. However, the Plaintiff was dissatisfied with Pantos’ professionalism, corporate profile, and communication style. The Plaintiff subsequently declined Pantos’ offer and received a formal termination letter from LG.

Did the Plaintiff’s rejection of the offer of re-employment with Pantos constitute a failure to mitigate?

Justice Dineen concluded that the duty to mitigate was not engaged by the offer from Pantos because it was made and withdrawn before the Plaintiff’s actual termination.

The defendant relied on Hickey v. Christie & Walther Communications Limited, 2020 ONSC 7214, which found that the fact that the timing of the offer of re-employment came before termination was not determinative. However, in this case, the reason the comparable offer was made before termination was that the employer had extended the Plaintiff’s employment to allow for continuing negotiations after two prior offers were rejected. Justice Dineen found that the facts in the case at bar were not analogous to Hickey because it would be unjust to use the benefit extended by the employer to hold that the duty to mitigate was not triggered. Instead, Justice Dineen accepted the reasoning in Dussault v. Imperial Oil Limited, 2018 ONSC 1168 where Justice Favreau (as she then was) stated:

“It is fatal to an employer’s argument that an employee failed to mitigate his damages by working for his old employer where the offer of alternative employment was made before the termination… the appellant’s mitigation argument presupposes that the employer has offered the employee a chance to mitigate damages by returning to work. To trigger this form of mitigation duty, the appellant was therefore obliged to offer Mr. Farwell the clear opportunity to work out the notice period after he refused to accept the position of Purchasing Manager and told the Appellant that he was treating the reorganization as constructive and wrongful dismissal.”

Similarly, the Plaintiff in this case received and rejected the offer to continue his employment on materially different terms before his termination. By the time his termination was affected, the position was filled, and he was not able to mitigate his damages by reconsidering and accepting it. The Plaintiff provided a job log showing that he applied for many comparable positions and had four job interviews, showing a reasonable effort to mitigate his damages.

Takeaways

Successor employers face an issue of balancing competing interests on the sale of a company. It is common for the purchasing employer to offer employment to existing employees prior to closing to create staffing certainty and appropriate workforce planning. This business need is further complicated by the risk of triggering Employment Standards Act termination and severance pay if employees reject the offer of re-employment.

The decision in Giduturi reiterates that employers should consider keeping offers of employment open for acceptance until after the closing of the sale transaction to allow the employee the opportunity to mitigate by accepting re-employment. In the absence of
keeping employment offers open, the employee will not trigger the duty to mitigate by accepting re-employment unless the offer of re-employment is made following termination.

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