Fair v. Red Lion Inn

Supreme Court of Colorado, En Banc · 1997 · Contracts

Contractsbreach of employment contractmitigation of damagesreinstatementback payunconditional offerspecial circumstancesdirected verdict

Facts

Fair worked for Red Lion and took an approved medical leave after a car accident. After submitting medical releases and seeking a short extension, she learned Red Lion had terminated her because it could not hold her position open past the leave expiration date; she later claimed this breached an implied employment contract. After Fair's attorney asserted that Red Lion had failed to comply with its own medical leave policies, Red Lion sent Fair an offer to return to her former room service position and later clarified that benefits would be restored with her original hire date bridged. Fair did not accept or further discuss the offer, and at trial said she rejected it because she feared retaliation, was concerned about her pregnancy, and was uncertain what 'appropriate benefits' meant.

Issue

Whether, in an employment contract case, an employee who rejects a former employer's unconditional offer of reinstatement fails to mitigate damages as a matter of law absent special circumstances. More specifically, the question was whether Fair presented sufficient evidence of special circumstances to let the jury award back pay accruing after Red Lion's reinstatement offer.

Rule

An injured party claiming breach of an employment agreement has a duty to mitigate damages. In that context, the duty includes accepting an unconditional offer of reinstatement to the same or a substantially equivalent position unless special circumstances justify rejection; absent such special circumstances, rejection cuts off any claim for back pay accruing after the date of the offer.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz worked for Summit Harbor Lodge in Aspen under an implied employment agreement. After the lodge breached that agreement by discharging her, it sent her a letter offering her old housekeeping supervisor job back at the same pay, same schedule, and same benefits, effective immediately, with no conditions attached. Lena refused because she no longer trusted management and assumed they would just fire her again.

If Lena sues for breach of contract and seeks back pay accruing after the offer date, what is the strongest argument for the employer?

Explanation. The majority held that an employee claiming breach of an employment agreement has a duty to mitigate damages, and that duty includes accepting an unconditional offer of reinstatement to the same or a substantially equivalent position unless special circumstances justify refusal. Mere apprehension, distrust, or unsubstantiated fear of retaliatory firing is insufficient as a matter of law. Therefore, back pay is cut off as of the offer date.