A recent decision of the British Columbia Supreme Court has affirmed that an employee will not be required to mitigate by accepting alternate employment with the same employer if doing so would place the employee in an uncomfortable or embarrassing position. The case also serves as a cautionary tale for employers using fixed term employment contracts.
The employee was hired as District Manager of a pizza franchise and was responsible for overseeing 16 pizza shops. Her employment was governed by a written employment contract with a three-year term. The contract expressly provided that the employee could terminate the contract upon providing one month’s notice, but was silent on the employer’s ability to terminate prior to the expiry of the term.
Shortly thereafter, the owner and CEO initiated an extra-marital affair with the employee which continued for approximately 8 months. After the affair ended, the CEO grew critical of the employee’s performance. Fifteen months into the contract the employee was informed that her position as District Manager was ending and she would continue working as a single store manager at a franchise owned by the CEO’s brother. The employee refused to report to work in the alternate position.
The employee alleged that she had been terminated and claimed damages for the balance of the three-year contract term. The employer took the position that the employee had resigned. Further, even if she had been terminated, the employer argued she was only entitled to one-month’s notice under the contract and had failed to mitigate by accepting the store manager role.
The Court held that the employee was terminated from her position as District Manager without cause and without notice. On the issue of mitigation, the Court found there was no failure to mitigate by the employee. It was reasonable for her to reject the store manager position in the circumstances because it represented a significant and embarrassing demotion. This affirms prior case law which has held that no employee will be required to mitigate in an environment of hostility, embarrassment or humiliation.
On the issue of damages, the Court held that because the contract was for a fixed-term of three years and contained no clause permitting the employer to terminate early on notice, the employee was entitled to damages for the balance of the term of the contract (21 months). This decision underlines the importance of care in drafting a fixed-term contract. Employers using such contracts should consider including a termination clause to avoid potential liability arising from early termination.
Questions relating to the content in this article may be directed to Nicole Toye.