week’s Nova Scotia Court of Appeal’s decision in Halifax Herald Limited v. Clarke, 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) misapplying 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.
Halifax Herald Limited 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
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.
Exclusion of the actual sales results
At trial, the Herald tried to lead evidence of actual sales figures from after
the employee decided to leave to support its position that his income would not
have gone down. The trial judge refused to allow the Herald to cross-examine
the former employee on, or lead evidence through its own witnesses of, the
actual sales on the basis that they were not relevant because they arose after
the employee had quit and sued.
The Court of Appeal found that excluding this evidence was an error and that
the actual sales figures were relevant. Although they were “after the fact”
evidence, they were relevant to both constructive dismissal and mitigation.
While the evidence was not known at the time that the former employee decided
to leave and would not have been determinative of the issue, it was relevant to
assessing the reasonableness of the former employee’s subjective beliefs that
his income would be reduced in the new position, despite the Herald’s own
expectations to the contrary. The evidence was also relevant to mitigation
since, in her decision, the trial judge had made positive findings of fact that
the former employee’s income would have declined had he remained.
The Court of Appeal held that this error alone would have been sufficient to
order a new trial, but given its determinations on the other two issues, this
dismissal: when is a unilateral change deemed a dismissal?
On the constructive dismissal issue, the court determined that the trial judge
had failed to apply the correct legal standard for constructive dismissal to
the uncontested facts established at trial. The trial judge found the
unilateral change to the employee’s position constituted constructive dismissal
because it affected his compensation and changed his duties and
responsibilities. However, constructive dismissal requires not only a
unilateral change, but an assessment of whether that change is so serious or
substantial so as to demonstrate “an intention not to be bound by the
The court highlighted the uncontested evidence led by the Herald at trial and
noted that the trial judge had not referred to any of it in her analysis but
instead focused solely on the former employee’s subjective views. Viewed
objectively, the Court of Appeal decided that the Herald had not shown an
intention to no longer be bound by the employment contract and therefore had
not constructively dismissed the former employee.
when can an employee quit and sue?
The Court of Appeal then considered the
Herald’s third ground of appeal, which was that even if the former employee had been
constructively dismissed, he had a duty to mitigate his damages by continuing
in the new position (commonly known as “Evans
mitigation,” following the Supreme Court of Canada’s decision in Evans v. Teamsters Local Union No. 31).
Here, the court found that the trial judge had failed to apply the correct
legal standard and ignored plainly relevant evidence. The critical focus of the
Evans mitigation analysis is that an employee should not be obligated to
mitigate by working in “an atmosphere of hostility, embarrassment or
humiliation.” The Herald’s evidence at trial was that it wanted to maintain the
employment relationship with the employee, who was valued and well-liked. The
trial judge expressly recognized the absence of acrimony in the workplace, but
nonetheless focused solely on income reduction in finding that the former employee
did not have a duty to stay in the role to mitigate his losses.
For more information see:
• Halifax Herald Limited v. Clarke, 2019 NSCA 31 (N.S. C.A.).
• Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (S.C.C.).
G. Grant Machum is a partner and former Labour and Employment practice group leader with Stewart McKelvey in Halifax. He can be reached at (902) 420-3330 or firstname.lastname@example.org. The Halifax Herald was represented at trial and on appeal by Sean Kelly and Killian McParland of Stewart McKelvey’s Labour and Employment practice group.