Before bringing a claim for severance or additional notice against your former employer, you must remember the corresponding “duty to mitigate” and consider whether it applies to your situation. The duty to mitigate in employment law is simply an obligation on a dismissed employee to make reasonable efforts to minimize losses suffered by looking for alternative employment.  It is important to note that this duty does not arise in all instances of wrongful dismissal. For example, where the employment contract states that the duty will not apply upon termination, the duty to mitigate does not apply.

However, where a written employment contract is silent on mitigation, or does not even exist, it is likely that your situation will trigger the duty to mitigate. In other words, you must take active steps to find other sources of income to reduce your losses incurred from being dismissed from your employment. This is because the value of damages that you seek to claim against your former employer will be assessed by how well you have mitigated your losses.

If you secure a new employment during the notice of termination period, the court will make dollar to dollar deduction from the new job income in assessing your claims. Remember, a severance payment is not an extra paid time off; rather, it is meant to cover you for the loss of income during a reasonable period of unemployment. New income will reduce the loss, and so the courts can reduce the value of the claimed damages.

Nevertheless, the court’s assessment of damages would depend on whether the new job is comparable to the former employment or a “survival job” that have been taken to stay afloat. If your new job is the same pay grade as your previous job, then you will be taken to have fully ‘mitigated’ your loss. Here, the court can award the claimed damages only up to the date of beginning the new job.  But, if you find a job with a lesser pay grade than your previous job, the severance will be the difference in pay between the new job and the previous job.

Ultimately, it is likely that you may find a job that pays more than your previous job and then the real question becomes how the duty to mitigate will be applied in this case. Can your former employer take the excess earnings from the new employment and back-fill it to reduce the damages for the period of unemployment?

In a recent court decision Kideckel v Gard-X Automotive Refinish Inc., 2020 ONSC 37, the Ontario Divisional Court offered some clarification on the principle of mitigation where an employee mitigates with a new job that pays more than the previous job.   Kideckel, a 65-year old terminated employee worked for his former employer for almost 8 years as a delivery driver. At his termination, the employer provided him with 3 months’ working notice. Two weeks after the working notice, Kideckel was hired at a job. He earned more at his new employment than he had at his old job: in 2014, about one or two thousand dollars more and in 2015, more than ,000 in excess of what he would have made due to his overtime work. He sought damages for, at least, the two weeks of unemployment.

The Court held that an employer may not “backfill” the period of unemployment with the surplus in earning. If the employer gave adequate working notice for the entire notice period, the worker would have been paid while he continued work up until commencing new employment, with no duty to account back to his old employer for his increased wages.

This means that the additional notice period owing to you from your employer will only stop on the day that you become hired at a job for a better pay rate. The surplus income earned from the better pay job cannot be applied retrospectively by your employer to make up for the additional notice owed.

Given the employee’s duty to mitigate, it is important that you keep track of your job applications while negotiating reasonable severance with your former employer.

At Osuji and Smith Lawyers, our lawyers are available to assist you and ensure that your entitlements are protected.

Author: Calista Nwaiwu