In the context of a restructuring or reorganization, the duty to mitigate may sometimes require an employee to temporarily continue working for the same employer in a new position imposed by the latter. However, this duty does not extend to requiring the employee to permanently accept a demotion that could amount to a constructive dismissal.
The Québec Court of Appeal recently clarified this limit in the case of Poulin c. Hydro-Québec[1] (Poulin), concluding that a permanent transfer contested by the employee cannot be retroactively recharacterized as a reasonable mitigation measure.
The duty to mitigate damages
When an employer terminates an employee’s employment without serious cause, the Civil Code of Québec requires the employer to provide the employee with reasonable notice or to pay compensation in lieu thereof. In return, the employee has—in accordance with the general duty to mitigate damages that applies to any aggrieved party—the obligation to take reasonable steps to minimize the harm resulting from the loss of employment.
This duty to mitigate generally requires the employee to take active and diligent steps to find comparable employment during the notice period. It also means that the employee may not, without valid reason, refuse a reasonable employment opportunity, including, in certain circumstances, an offer from the former employer.
An offer from the same employer
In Evans v. Teamsters Local Union No. 31[2] (Evans), the Supreme Court of Canada recognized that the duty to mitigate may, in certain circumstances, require a dismissed employee to accept an offer from the employer to temporarily return to work for the duration of the notice period. The analysis then consists of determining whether a reasonable person, placed in a similar situation, would accept this offer. To answer this question, the courts consider, among other things, whether:
- The compensation remains unchanged;
- The terms and conditions of employment are essentially comparable;
- The proposed duties are not demeaning; and
- Personal relationships are not acrimonious.
The human dimensions of the employment relationship are central to this analysis. A return to work will not be required where it would place the employee in a situation marked by hostility, humiliation, or discomfort.
The importance of how the offer is made: The lesson from Poulin
When the termination of employment results from a substantial change in working conditions amounting to a constructive dismissal, a preliminary question must be resolved before even applying the Evans criteria and assessing the reasonableness of the proposed work: Did the employer clearly offer the employee the opportunity to return to work temporarily, for the duration of the notice period, or did the employer instead attempt to impose a permanent transfer? This distinction is of paramount importance, as illustrated by the Poulin case.
In that case, Mr. Poulin, a senior executive with 35 years of service at Hydro-Québec, had been transferred from a vice-president position with significant strategic responsibilities to a senior director position with a more operational focus. Although his salary and benefits remained unchanged, Mr. Poulin alleged that the substantial reduction in his responsibilities amounted to a constructive dismissal. Hydro-Québec disagreed and informed him that his refusal to accept the transfer would be treated as a resignation. At first instance, the Superior Court concluded that Mr. Poulin had indeed been constructively dismissed. However, it ruled in favour of the employer, which argued that he had failed to mitigate his damages by refusing the alternative position, thereby forfeiting his right to any damages. The court based its analysis, in particular, on the fact that he would have retained his compensation, that the proposed new position was not demeaning and did not expose him to acrimonious relationships, and that, consequently, a reasonable person would not have refused it.
The Court of Appeal overturned this decision. It held that the Evans criteria apply only to situations in which the employer offers the employee the opportunity to return to work in the demoted position solely for the duration of the notice period. However, Hydro-Québec asked Mr. Poulin to accept his transfer on a permanent basis and advised him that his refusal would be considered a resignation. When Mr. Poulin refused to accept this change of position, the employer did not offer him the option of temporarily filling the position to which it wished to transfer him so that this assignment would serve as notice. Instead, Hydro-Québec presented him with the sole option of permanently accepting this contested change in his duties, failing which it would consider him to have resigned. Under these circumstances, the Court of Appeal determined that his refusal could not constitute a failure to mitigate.
The Court of Appeal also emphasized that accepting the modified position would have had significant legal consequences for Mr. Poulin, as he would have remained bound by his non-compete clause and would likely have lost his severance pay. The Court therefore allowed the appeal and ordered Hydro-Québec to pay Mr. Poulin the sum of CA$836,365, equivalent to 24 months’ salary.
Practical advice
Before unilaterally modifying an employee’s working conditions, the employer must determine whether the proposed changes affect an essential term of the employment contract. This may be the case, in particular, when the changes result in a significant reduction in the scope of the employee’s responsibilities or a loss of decision-making authority.
When an employee refuses a transfer that could constitute a constructive dismissal, the employer cannot presume that this refusal amounts to a resignation. If the employer wishes the employee to temporarily return to work in the position to which the employer intended to transfer the employee during the notice period as a means of mitigating damages, the employer must present an expressly temporary offer, for a duration corresponding to the reasonable notice period, while allowing the employee to seek new employment during that time. The circumstances must also allow for the maintenance of an employment relationship based on mutual understanding and respect.
The decisive question, therefore, is not merely whether the proposed position appears reasonable from an objective standpoint. The employer must also consider whether it clearly offered the employee the opportunity to temporarily continue working for a fixed term corresponding to the reasonable notice period. Such an offer may be made without the employer conceding that the situation constitutes a constructive dismissal, provided that it is explicitly temporary and allows the employee to understand that the employment relationship is of limited duration and that he or she will need to seek other employment during that period. In the absence of such an offer, the employer cannot rely solely on the employee’s refusal of the disputed position to establish a failure to mitigate.
For more information on this topic, please reach out to Camille Paradis-Loiselle and Arianne Bouchard.
The authors would like to thank summer student, Maya Kanzari, for her contributions to this article.
[1] 2026 QCCA 758.
[2] 2008 SCC 20.
