Managing Change In The Workplace – Constructive Dismissal And The Duty To Mitigate

Last week's Nova Scotia Court of Appeal's decision in Halifax Herald Limited v. Clarke, 2019 NSCA 31, is good news for employers. The Court overturned the trial judge's determinations that an employee had been constructively dismissed after he was transferred to a new sales position and had not failed to mitigate his damages by declining to stay at work in the new position.

The Court held that the trial judge had committed three reversible errors by: (1) excluding relevant evidence of actual sales results; (2) mis

applying the legal test for constructive dismissal; and (3) misapplying the legal test for mitigation. As a result, the Court not only overturned the trial decision but dismissed the action outright. The former employee must now pay the Herald approximately $130,000, which includes trial and appeal costs.

This decision is good news for employers faced with restructuring their business to manage industry change and other developments. It brings improved clarity to the law of constructive dismissal and the duty to mitigate. The analysis must be objective and consider the evidence from the employer without unduly focusing on the employee's subjective views. Moreover, a reduction in income - whether actual or anticipated - does not automatically remove the duty to mitigate by continuing in the position.

Background

Halifax Herald Limited ("Herald") is a media company and, facing the decline in advertising and circulation revenues affecting the traditional print media industry, had been diversifying its lines of business into new areas.

The former employee was a long service salesperson with the Herald who for many years had sold advertising space in newspapers. He was transferred by the Herald into a new sales position that would instead focus on two new lines of business targeted for growth. While the new position had the same base salary and benefits, compensation in both positions was primarily based on commissions.

The parties had different outlooks on the sales prospects for the new position, upon which the employee's variable income would be based. The Herald was optimistic and the employee was pessimistic. The Herald offered a period of guaranteed income, which was increased following some discussions regarding the employee's concerns. Rather than wait and see or stay under protest in order to mitigate his losses, the employee quit and sued for constructive dismissal, saying that his compensation had been unilaterally reduced.

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