Time to Move On… But at What Cost? Does an employer have to pay relocation costs after an employee has been terminated?
Terminating an employee can be costly. It is well known that employers are required to provide the employee with notice of termination, or pay in lieu of that notice. When an employee is terminated, they must mitigate any damage resulting from their loss of employment. Where an employee fails to mitigate, or secures comparable employment during the notice period, their severance payment amount is reduced accordingly. However, added costs to the employer can result from the employee’s duty to mitigate.
In the case of MacGregor v Lethbridge College, 2016 ABPC 72 (“MacGregor”), Dr. MacGregor was constructively dismissed from his position at Lethbridge College. Dr. MacGregor mitigated his damages by taking a similar position at another college in Vermillion, Alberta and claimed damages for his moving costs. At trial, Dr. MacGregor was awarded real estate commission, legal fees and other costs related to his relocation.
In coming to this conclusion, Justice Pharo considered three previous cases that looked at whether mitigation expenses are recoverable by the employee:
- In Porta v Weyerhaeuser Canada, 2001 BCSC 1480 (“Porta”), Mr. Porta was transferred by his employer in Grand Prairie, Alberta to a plant in Merritt, BC. Mr. Porta was subsequently terminated and moved back to Grand Prairie. Relocation costs including the difference between rent in Grand Prairie and mortgage payments on Mr. Porta’s Merritt house, the pre-payment penalty for the mortgage, and the costs of gas, meals and moving expense were awarded. However, real estate commission costs from selling his Merritt house were denied because they did not arise from the breach of Mr. Porta’s employment contract.
- In Robinson v Team Cooperheat-MQS Canada Inc., 2008 ABQB 409 (“Robertson”), the Robertson’s moved from Alberta to Ontario after Mr. Robinson was terminated. Mr. Robinson’s claim for relocation costs was denied because the move to Ontario was for purely personal reasons – The Robertson’s were planning to move to Ontario upon retirement anyways.
- Lastly, in Carbone v Syncrude Canada Ltd.,  AJ No 1068, Mr. Carbone was wrongfully terminated from a plant in Fort McMurray and mitigated his loss by getting another job in Lloydminster. The Court found that had Mr. Carbone not moved, he might have been held to have failed to mitigate. As a result, damages for real estate commissions, mortgage interest penalties, legal fees, movers, transportation, gas and rent were awarded.
From these three cases, Justice Pharo summarized the law on relocation costs by stating that “the onus is on the plaintiff to prove, on a balance of probabilities, that his damages flow from the breach of the employment contract. Mitigation expenses which are reasonably necessary to take up new employment are recoverable. Real estate commissions and legal fees fall into this category provided it can be shown that the move was done to mitigate, and not for other personal reasons”.
So, although an employee’s duty to mitigate can reduce the amount of severance pay they may be paid by an employer, it can also result in unanticipated costs to the employer where the employee must relocate when discharging their duty to mitigate.
Invitation for Discussion:
If you would like to discuss this article in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Business Law group at Shea Nerland LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.