Employee Should Have Taken Test Drive

Car dealerships have no shortage of gimmicks to get potential buyers to take a ‘test drive.’  The sales theory goes that if someone tries a car, he is more likely to buy it.  “There is no harm in testing it out,” the dealer will claim.  A recent Ontario Superior Court ruling concerning a car dealership parts and service manager’s constructive dismissal case appears to confirm that as much might be true.

 

In reasons released June 15, 2012, Ghanny v 498326 Ontario Limited, 2012 ONSC 3276, the Honourable Justice Edward Belobaba held that an employee that refused a similar job at the same rate of pay had failed to mitigate his damages with the result being that his wrongful/constructive dismissal claim was dismissed and he was ordered to pay costs of $15,000 to his employer.

Facts

In June, 2008, Shahin Alizadeh, the owner of Downtown Toyota decided to streamline the management of one of his car dealerships by reshuffling and eliminating some of the positions. He told the plaintiff employee, Aleem Ghanny, that his $80,000 job as Service Manager would end at the end of the month but he would be relocated to Downtown Suzuki, a recently acquired and related dealership, just a few blocks away, where he would continue as Parts and Service Manager with the same $80,000 compensation package.

Mr. Ghanny refused the position at Downtown Suzuki for two reasons: he thought his 18 years of service would not be recognized if he joined the Suzuki dealership and he was concerned that the future of this dealership was uncertain.  Mr. Ghanny thus rejected the offered position and brought his action for wrongful dismissal a month after his termination.

Decisions

In his reasons for decision Justice Belobaba made a number of findings:

1. Mr. Ghanny likely may have been wrongfully/constructively dismissed;
2. The employer’s provision of one (later three) months’ notice was insufficient under the circumstances;
3. Mr. Ghanny was within his rights to insist that he could maintain his lawsuit while working at the Suzuki dealership; and
4. Mr. Ghanny’s failure to accept the position at the Suzuki dealership was a fatal failure to mitigate his damages.

Nothing more will be said with respect to the wrongful dismissal analysis.  Demonstrably, certain changes had been made to Mr. Ghanny’s working conditions.  Whether those changes were sufficient to make out a claim for constructive dismissal was not fully canvassed in the decision given Justice Belobaba’s decision on mitigation.

Failure to Mitigate

As Justice Belobaba correctly observed, “Whether it was a wrongful or constructive dismissal, Mr. Ghanny was required to mitigate his damages while looking for another job. The obligation to mitigate may well include taking the job that is being offered by the dismissing employer.”  (Para. 10)

Justice Belobaba then turned to the Supreme Court of Canada’s 2008 decision in Evans v. Teamsters Local Union No. 31, 2008 SCC 20 in which the Court ruled that:

In some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer ... requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice, and not to penalize the employer for the dismissal itself. The notice period is meant to provide employees with sufficient opportunity to seek new employment and arrange their personal affairs, and employers who provide sufficient working notice are not required to pay an employee just because they have chosen to terminate the contract. Where notice is not given, the employer is required to pay damages in lieu of notice, but that requirement is subject to the employee making a reasonable effort to mitigate the damages by seeking an alternate source of income.

Justice Belobaba then added,

Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity. The reasonableness of an employee's decision not to mitigate is assessed on an objective standard.  [Para. 12.  Citations omitted.  Emphasis added.]

Applying the law to the facts of the case, Justice Belobaba held that,

Mr. Ghanny’s refusal to accept the Downtown Suzuki position was unreasonable when viewed objectively. It was the same kind of job with the same pay… The dismissing employer wanted him to accept the Suzuki position – he was a valued employee. There is no suggestion that the working conditions at Downtown Suzuki were demeaning or that Mr. Ghanny’s relationship with Mr. Alizadeh or indeed with anyone else had become difficult or acrimonious.  [Para. 15]

In the end, Justice Belobaba ruled that, “Had [Mr. Ghanny] accepted the position at Downtown Suzuki he would not have suffered any losses flowing from his dismissal from Downtown Toyota. He is therefore not entitled to damages.”  (Para. 26)

Option to Maintain Constructive Dismissal Action

It is to emphasized that what Justice Belobaba ruled was not that Mr. Ghanny ought to have taken the position at the Suzuki dealership and never said anything more about it; but rather that if he honestly disagreed with the situation, then the practical thing for him to have done would have been to have transferred to the Suzuki dealership and worked there while he looked for new employment elsewhere.  By continuing to work for and thus receive income from Mr. Alizadeh, Mr. Ghanny would have mitigated (i.e. lessened) his wrongful dismissal damages.  The law demands as much.

An issue arose during the trial of this matter in which it was brought out that at one time the employer had again offered to employ Mr. Ghanny.  Mr. Ghanny was willing to accept the position but on three conditions, “that Downtown Toyota guarantee his salary and benefits at Downtown Suzuki, address the issues of lost wages and legal costs incurred to date, and allow the plaintiff to continue his lawsuit.”

Although Justice Belobaba ruled that the defendant had no obligation to make up Mr. Ghanny’s lost wages or pay his legal fees, His Honour did rule that the Mr. Ghanny had the legal right to maintain his lawsuit.  Although Justice Belobaba made no explicit reference to Russo v. Kerr, 2010 ONSC 6053, readers may be interested in reading that decision as well as it speaks to a similar issue.

Commentary

In my humble opinion Justice Belobaba was correct; Mr. Ghanny’s position was unreasonable.  At the very least he should have tried the Suzuki dealership ‘on for size.’  Had things at the Suzuki dealership not been as promised, then Mr. Ghanny would have had a more solid constructive dismissal case, plus he would have been earning income while looking for new employment, thus satisfying the duty to mitigate criterion and meeting the ever-important objective of maintaining cashflow.

In the end, Mr. Ghanny’s dismissal came with the added insult of having to pay his employer’s legal costs.  Perhaps he should have taken that test drive after all.

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As always, everyone’s situation is different.  The above is not intended to be legal advice for any particular situation and it is always prudent to seek professional legal advice before taking any decisions on one’s own case.

Sean Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer.