Russo: working for the company you are suing

Russo v. Kerr, 2010 ONSC 6053, a decision of the Ontario Superior Court, addresses some of the more esoteric elements of the interplay between wrongful/constructive dismissal and mitigation of damages. Russo is noteworthy for the approach it takes to the question of an employee’s right to sue for damages during a period of working notice.

Mr. Russo was a 53 year-old employee who had given 37 years of service to the Defendant. When the Defendant ran into financial difficulties, it hired an analyst to make recommendations geared toward returning the Defendant to profitability. The analyst recommended an across-the-board wage deduction, but singled out four employees, Mr. Russo included, for an even greater reduction in wages. Mr. Russo had a compensation package well in excess of $100,000 reduced to about $60,000.

Mr. Russo’s lawyer informed the employer that Mr. Russo did not acquiesce to this reduction in pay. The difficulty most plaintiffs face in such a situation, however, is that leaving the job might be viewed as quitting. Accordingly, leaving a job (even as a result of constructive dismissal) can reduce an employee’s claim for damages or even extinguish an employee’s chance to sue for wrongful/constructive dismissal. On the advice of counsel, Mr. Russo voiced his objections to the terms of the new contract but continued to work. He commenced a lawsuit claiming constructive dismissal while serving working notice with the Defendant, and well before the expiration of a reasonable notice period.

Interestingly, Russo contained no analysis of the common law principle that an employee can effectively quit during a working notice period by suing for constructive dismissal (see, for example, Suleman v. British Columbia Research Council, 1990 CanLII 746 (BC C.A.)). The Defendant appears not to have taken that position in Russo.

The Supreme Court of Canada made clear in Evans v. Teamsters 2008 SCC 20 that a constructively-dismissed employee might owe a duty to continue working for the employer in order to mitigate damages. In Russo, the parties agreed there had been a constructive dismissal.

The court found that Mr. Russo was constructively dismissed. Damages were payable in an amount representing the difference between what Mr. Russo would have earned during a reasonable notice period (22 months in these circumstances) and what he would earn under the altered agreement.

In an article published by the Law Times, counsel for the Defendant in Russo is quoted as saying the decision makes clear that Mr. Russo’s employment will be over at the end of a 22 month notice period. With respect, I do not agree with that statement.

Gray, J. wrote the following:

“As applied to this case, the plaintiff can remain in the workplace under the changed terms as a means of mitigating his damages, but only for the period of reasonable notice. If he elects to remain in the workplace under the changed terms beyond the period of reasonable notice, with the consent of the defendant, it must then be concluded that he has accepted a new contract of employment under the changed terms after the expiry of the period of reasonable notice.”

This excerpt specifically contemplates employment beyond a period of reasonable notice. It seems to me that Gray, J. was saying that a plaintiff’s non-acquiescence in a constructive dismissal cannot create an indeterminate period of damages. Rather the period of damages is limited by the traditional concept of a reasonable period of working notice. Continuing to work after a reasonable notice period would indicate that Mr. Russo accepts the reduced remuneration going forward.

Evans states that a dismissed employee has a duty to attempt to mitigate damages, and that duty can sometimes be discharged by taking a different job with the old employer. Framed as mitigation (instead of acquiescence), the new contractual arrangement is no different from obtaining employment with a new company. If Mr. Russo were terminated at the end of the 22 month period, I would submit he would be entitled to sue based on the new contract just as he would be if he had been terminated after 22 months with a new employer.

Russo showcases two parties that found an arrangement which eludes so many others in the employment law context. Mr. Russo would work and be paid for that work. Viewing the relationship as terminated after the notice period would be an unfortunate result indeed. It seems the foundation of the working notice arrangement was recognition by both parties of continued mutual benefits. I see no reason why Mr. Russo could not continue working under the new contract until such mutual benefits cease.