Employment and Mutual Trust: A Warning to Employers and Employees

Employers who seek to reduce their liability for wrongfully terminating an employee must maintain a relationship of mutual trust with their employee. That is a conclusion to be drawn from the recent decision of the British Columbia Court of Appeal in Fredrickson v Newtech Dental Laboratory [2015] B.C.J. No. 1796.

It is a well-known tenet of employment law that when an employer wishes to dismiss an employee without just cause, the employer must either provide the employee with working notice, or pay in lieu of notice. When an employee is dismissed without cause and notice, their termination is said to be wrongful and the employee is entitled to recover pay in lieu of notice. An employee’s right to recover the amount they would have received had proper notice been given is subject to one important qualification, namely, that the employee must attempt to mitigate their loss by seeking out, and if possible, engaging in similar alternate employment. If a wrongfully terminated employee refuses similar employment, their ability to seek damages against their former employer may be severely hampered.

In Fredrickson v Newtech Dental Laboratory an employer who had dismissed an employee sought to reduce their potential liability by extending an offer of re-employment. The employee refused the offer and at issue before the British Columbia Court of Appeal was whether the employee’s refusal to return to work constituted a failure to mitigate, and thus whether the employer’s liability to the employee should be reduced. The Court held that the employee had no obligation to accept the offer of re-employment as the circumstances surrounding the termination had broken the “mutual trust” integral to the employment relationship. Employers should thus be aware that they may reduce their liability to a terminated employee by extending an offer of re-employment only when the circumstances surrounding the employee’s dismissal has not broken the relationship of mutual trust. On the other side, employees should be aware that they may be able to refuse an offer of re-employment and still pursue their former employer for damages.

Whether the relationship of mutual trust between employer and employee has been broken is a highly contextual matter, and requires an examination of the conduct of both employer and employee during the termination of the employment contract.

Drew Jarisz

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