Cutting Your Losses: THE DUTY TO MITIGATE IN WRONGFUL DISMISSAL LAWSUITS IN ALBERTA
A recent King’s Bench case shows that it isn’t always easy to prove a failure to mitigate
Unless expressly limited by agreement, employment contracts in Canada contain an implied term that employers must provide reasonable notice of termination to employees. Where an employer fails to provide reasonable notice, the Courts may award damages to a wrongfully dismissed employee as compensation for breach of the implied term.
But the Courts also expect wrongfully dismissed employees to take steps to find replacement employment to “mitigate” their damages for having been dismissed. That is, employees must take reasonable steps to find suitable replacement employment to reduce their financial losses. If an employee fails to take steps to find new employment and demonstrate his or her attempts to do so, a Court may reduce any damages award accordingly. The burden of proof always rests with the employer to show the employee failed to meet the obligation to mitigate.
To prove an employee failed to mitigate their losses, an employer must show two things:
- the employee failed to take reasonable steps in the circumstances to find reasonable alternative employment; and
- if the employee had taken those steps, he or she would have likely found suitable employment.
An employee is not required to take any job available in order to mitigate, such as by going from working as a Director of a corporation to an entry-level worker. The Courts expect employees to make a reasonable decision about whether to accept an offer of employment; but they do not expect employees to make the best possible decision.
In Watson v Schlumberger Canada Limited, a recent Alberta case, Schlumberger Canada Limited fired Jeanette Watson, a professional geologist, without notice after 20 years of employment with the company. One issue at trial was whether Watson failed to mitigate her damages by refusing to accept an employment offer with a company called LinkPoint. The Court found it was reasonable for Watson to reject the role because her base salary at LinkPoint would have been significantly lower than her base salary at Schlumberger and did not include benefits. So, Watson’s failure to accept the LinkPoint position was not contrary to her duty to mitigate, and the Court did not reduce her damages.
Overall, the Court concluded that Schlumberger owed Ms. Watson 20 months of reasonable notice. This amounted to almost half a million dollars in compensation for lost salary, commissions, and other employment benefits!
Notably, in Schlumberger, the employer did not put any evidence before the Court demonstrating what commissions Ms. Watson might have earned at LinkPoint. If the employer had provided evidence that Ms. Watson’s overall compensation would have been comparable to her Schlumberger salary and commissions, the outcome in the case might have been different. The lesson for employers is that it may be wise to press for detailed mitigation information during the discovery phase of a lawsuit.
In Schlumberger, the employer likely thought they had a strong argument that Watson had failed to mitigate her damages. But the outcome of the case shows that proving a failure to mitigate isn’t always as easy as it appears. What’s more, where a wrongful dismissal claim succeeds, it can be very costly for the employer – in Schlumberger, costing the employer almost half a million dollars plus legal costs.
If you’re dealing with a wrongful dismissal issue, like in the above case, contact Osuji and Smith Lawyers and one of our experienced employment lawyers would be happy to assist you.