Not Required to Mitigate With Demotion Post-Constructive Dismissal

by Dentons

[author: Kristin Taylor]

The Ontario Court of Appeal has released its decision in Chandran v. National Bank, 2012 ONCA 205 upholding the trial decision. The trial decision is a cautionary tale for employers.

Mr. Chandran was a 18 year employee of the Bank having worked his way up from account trainee to senior manager. An informal employee satisfaction survey conducted by a HR manager revealed that Mr. Chandran engaged in bullying behaviours. Upon reviewing the results of the survey, Mr. Chandran’s boss concluded he should be removed from supervisory duties. He asked the HR Manager to identify potential openings to which Mr. Chandran could be transferred. On Mr. Chandran’s return from vacation, his boss and the HR manager told him about the general allegations, but refused to provide examples or specifics. Mr. Chandran denied the allegations. The Bank then issued a final warning letter that concluded he had engaged in disrespectful treatment of employees and colleagues contrary to its code of professional conduct and harassment and discrimination policy. The Bank relieved Mr. Chandran from his supervisory role and offered two alternate positions. Both alternate positions were relatively comparable to the senior manager role, without supervisory responsibilities.

At trial, the Bank maintained it did not have to conduct a proper investigation, and that it did not have to have cause for discipline because the two positions were comparable and did not constitute a demotion and constructive dismissal. Mr. Chandran argued both jobs were at a lower grade level resulting in lower compensation and lower prestige and that his trust in the Bank had been destroyed having not been given a chance to defend himself. His career path to future promotions had been jeopardized.

The trial judge found in Mr. Chandran’s favour. The court was critical about the lack of proper investigation conducted to support such serious discipline and harm to a long-term employee’s career. According to the court, a reasonable person in Mr. Chandran’s position would believe his employment future would be significantly limited and terms and conditions of employment substantially changed. This constituted a constructive dismissal. The court further held that, “having been issued the serious discipline … and forced to accept either of the positions which were not equal in terms to the one he held, Mr. Chandran would have been subjected to ‘an atmosphere of embarrassment or humiliation’”.

The Bank also quibbled with Mr. Chandran’s actual mitigation efforts. Although Mr. Chandran secured another management role with another bank within 14 months, the Bank maintained that he should have applied to other lower-rated positions open within the Bank and worked harder to find such a position. The court disagreed. It found that 18 months constituted reasonable notice but reduced this to 14 months in light of when Mr. Chandran secured alternate employment.

On appeal, the Bank did not contest the finding of constructive dismissal, but challenged the trial judge’s conclusion that Mr. Chandran was not required to mitigate his damages by accepting one of the positions offered by the Bank. In a unanimous decision, the Court of Appeal found no palpable and overriding error in the trial judge’s conclusion. It similarly found no fault with the trial judge’s decision to increase Mr. Chandran’s award of costs by $20,000 because the Bank had not accepted a reasonable offer to settle.

What are the key takeaways from this decision? There are (at least) three: (1) a proper investigation with a full opportunity to respond is essential to support disciplinary action, (2) long-term employees deserve additional consideration before disciplinary decisions are made, and (3) demotions are humiliating and embarrassing even if dressed up as a transfer thus removing any obligation to mitigate by acceptance.

Chandran v. National Bank of Canada, 2012 ONCA 205 (CanLII)


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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