Employers should think twice before offering an alternative position instead of terminating an employee.

Most often when a workplace is being reorganized and a position eliminated, the person filling that role is simply terminated. Sometimes, however, there is a twist.

Caleb was 51 years old and worked for his employer for 19 years. As Director of Purchasing he made over $80,000 a year and participated in the employer’s benefits and pension plan.
Although Caleb did not have anyone reporting to him it was an important and independent role within the organization.

On the day of termination Caleb was given two letters. The first advised him of his termination as a result of the elimination of the role. It said he would get the eight weeks termination pay required as a minimum under the Employment Standards Act and another 12 weeks’ pay if he signed a full and final release; an offer of less than five months’ pay after 19 years of service. Not what one would call a generous offer.

The second letter Caleb received offered him a full-time permanent position of Supervisor-Service with a 27% drop in pay after six months. Caleb was not interested in the job offer and did not bite.

When the matter came to trial Caleb had argued for 20 months pay in lieu of notice, the employer for 14. The judge decided that Caleb was entitled to 17 months’ notice given his age, seniority, and level of responsibility. From that amount would be deducted any money made by Caleb from new employment.

The employer then argued that Caleb’s damages should be reduced because he failed to mitigate his damages in refusing continued employment as a supervisor.

The obligation to mitigate your damages as a dismissed employees means that you have a responsibility to look for reasonable alternative employment following your termination. Any monies earned are credited to the employer in a wrongful dismissal action.

The judge rejected the employer’s argument for two reasons. The first was that even if an offer of a  lesser job with a 27% decrease in pay had been made by some third party, Caleb would not have been obliged to accept it. It was a significant demotion with a big drop in pay.

The judge also noted that if Caleb had agreed to the new job with the six-month wage freeze before he lost 27% of his pay, the employer would likely have argued that he gave up his right to sue for more by accepting the offer of the new position.

If Caleb had accepted the new position then told the employer he wanted the lost wages for the remaining 11 months of the 17-month notice period he should have received, they would have resisted and claimed he accepted the new terms.

The point of Caleb’s story is not to discourage employers from offering employees who are losing their job an alternative position.

Many times over the years I have had people, especially those close to their planned retirement, wonder why the employer didn’t offer them an alternative position to finish out their last few years, even at a lower salary.
Offering an alternative position is never going to hurt an employer and if accepted, retains the services of a loyal, trained employee.

On the other hand, unless the position offered is a lateral move with similar pay, the employer should not expect to save on the severance package if the job is turned down. Caleb’s employer soured the milk by offering a stingy severance package as an alternative.

Caleb had a choice between a crappy package or a crappy job. He decided suing was a better alternative. No wonder.
Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees. You can email him at ecanning@rossmcbride.com.
Ed Canning
Ed Canning
P: 905.572.5809