A costly move: employer on the hook for $45,000 for constructively dismissed employee’s relocation costs

When Ralph (not his real name, of course) came to see me a few years ago about a potential case of being constructively dismissed, like many employees, one of the things he was most concerned about was the risk of being without an income. He was worried about his prospects of finding a new job. He said there weren’t a lot of jobs in his field in the surrounding area.

Ralph also mentioned he had been thinking of moving back out west to British Columbia where he had grown up. But that would come at a cost: selling his house, buying a new one and the costs of trekking his family and all of their belongings across the country.

Those costs could be quite expensive, said Ralph. Even prohibitive.

You’re right, Ralph. But perhaps those costs should not be at Ralph’s expense. Perhaps those expenses are part of the cost of wrongfully or constructively dismissing an employee who relocates to fulfill the duty to mitigate.

The decision in Robinson v. H. J. Heinz Company of Canada LP suggests that just might be so.

Karen Robinson worked for Heinz for almost 16 years. Initially hired as a supervisor of accounts payable, she had climbed the ranks to become a senior manager of accounting reporting directly to the controller. When the Leamington location at which she worked closed in 2014, she was approached with some promises relating to a position at the Toronto office. She accepted and made the move from Leamington, purchasing a home in nearby Mississauga.

When a subsequent merger and reorganization left her with what she perceived to be a significantly diminished role, she resigned and claimed constructive dismissal. She found a new job almost immediately. However, it was at a reduced income and involved her moving from her home in Mississauga back to southwestern Ontario.

In her constructive dismissal claim, Robinson sought compensation for her “costs of mitigation”, which included her relocation expenses.

The court held that the weight of authority in Ontario supported the recovery of real estate commission, moving expenses and legal fees incurred by an employee as a result of wrongful dismissal. In this case, the court also considered that Robinson had been made promises about the job in Toronto that were not fulfilled. The court held that by accepting the new job, Robinson substantially mitigated her damages and reduced Heinz’s exposure to a significant damages for lost income. However, to do so she was forced to relocate. The court found that Heinz should reimburse Robinson for all reasonable expenses incurred in mitigating: a total of $45,010.32.

The mitigation expenses for which Heinz was required to pay Robinson included:

• expenses for a one-month overlap during which time she owned the new home while the Mississauga home was yet to close
• real estate commission and listing costs, a mortgage pre-payment penalty, mortgage discharge fees and legal fees relating to the sale of the Mississauga home
• land transfer taxes, legal fees and related expenses relating to the acquisition of the new home
• moving and transitional expenses as a result of commuting back and forth to Mississauga while working at her new job, meals and living expenses while there, and costs of moving the plaintiff’s belongings to her new residence

Employees are generally entitled to seek reasonable out-of-pocket expenses incurred in the duty to mitigate. What is “reasonable” will depend on the circumstances of each case. Where an employee has roots elsewhere and is required or is successful in mitigating by way of relocating, an employer who has wrongfully or constructively dismissed an employee may be required to foot the bill for that move.

The takeaways:

1. Employees who believe they have been wrongfully or constructively dismissed should carefully track and keep supporting documentation for all mitigation-related expenses.
2. Employers might be liable for relocation costs of a wrongfully or constructively dismissed employee where it is necessary or foreseeable that the employee relocate to find a new job.